Understanding Restricted Authorization Networks:Cards Between Closed and Open Loop

New research looks at game changing technology blurring the lines between open- and closed-loop prepaid cards and turning the industry upside down

Prepaid cards have long been divided into two types: open-loop cards accepted wherever their network brand (e.g. Visa, MasterCard, American Express, Discover) is honored and closed-loop cards accepted only by the issuing merchant. Not anymore. Restricted Authorization Networks are quickly changing the traditional prepaid landscape and bridging the gap between open and closed loop cards.

RAN technology creates a sub-network on the open network rails (operated by Visa MasterCard, American Express, Discover and EFT operators), and as a fundamental function directs spending of open-loop (network branded) prepaid cards to only a select merchant or group of merchants. In many instances, RAN solutions are used to drive specific cardholder/consumer behaviors, such as an incentive program.

RAN technology can also be leveraged by a closed-loop issuer to transact, and if elected, settle funds on the open rails. For example, a national franchise operator running a gift card program may use this technology to avoid the costs of building their own closed loop network. A range of merchants have used RAN to create closed loop gift cards, including ACE Hardware, Dell Computer, and Marriott Hotels. RAN solutions also can be used to establish prepaid cards that tie loosely affiliated merchants into a national presence, such as auto repair centers, medical services, or even golf courses.

Mercator Advisory Group’s Understanding Restricted Authorization Networks report explains the operation and use, of these networks, along with descriptions of a wide variety of existing implementations that already deliver increased value in this rapidly evolving and growing market. This report defines and explores current and future implementations for Restricted Authorization Network.

Highlights of this report include:

Restricted Authorization Networks are card transaction processing systems that make decisions on whether to approve or deny transactions on criteria that include more than just available balances.

Most of the RAN market is comprised of cards connected with health savings accounts (HSA), where spending must be restricted, or private label cards that appear to cardholders as a single-merchant gift card.

Other types of prepaid cards that operate on RANs include fleet cards, incentive cards, mall cards, rebate cards, and campus cards.


RANs are not strictly a U.S. phenomenon. They are in use around the world to incent certain consumer behavior, control spending and expenses, and provide employee and government benefits.

“Restricted Authorization Networks offer new opportunities for prepaid card issuers, program managers, and sponsors to create new kinds of programs that deliver huge benefits to everyone in the value chain, including sponsors, merchants, processors, banks, and most importantly, the card holders,” Ben Jackson, senior analyst in Mercator Advisory Group’s Prepaid Advisory Service comments. “A well designed program can bring together the benefits of consumer choice, brand awareness, and directed spending onto a single card.”

One of the 11 Exhibits included in this report.



The report is 41 pages long and contains 11 exhibits

Members of Mercator Advisory Group have access to this report as well as research for the year ahead, presentations, analyst access and other membership benefits.

Please visit us online at www.mercatoradvisorygroup.com.

For more information call Mercator Advisory Group’s main line: 781-419-1700 or send email to info@mercatoradvisorygroup.com.