How Closed- p y tems Ensure Data Security and Prevent Fraud
While manual fare collection may feel like a thing of the past, many public transport networks still depend on it
In contrast, cities in developed regions often operate fully automated fare collection (AFC) systems yet most of them still use open-loop payments
The problem? Security often remains the weakest link.
From ticket fraud and revenue losses to data leaks and compliance gaps, the risks are only increasing as transit systems digitize without retaining full control A single breach can erode public trust and leave operators on the defensive.
Closed-loop automated fare collection systems offer a way to counter these challenges not just as a payment method, but as a secure, long-term infrastructure for transit authorities seeking greater control and reliability
Let’s examine the weaknesses of current systems and how closed-loop AFC addresses them.
Security Risks in Manual and Semi-Automated Fare Collection
Before the rise of digital ticketing, fare collection relied on paper tickets, cash, and in-person verification. Some networks still use these methods, while others have adopted partial automation like mobile ticketing, but without redesigning the full process Both approaches carry notable vulnerabilities
Lack of Transparency a
Without real-time transaction y how many tickets are sold, how much revenue is collected, and where losses occur. This lack of visibility makes internal fraud harder to detect and resolve
High Human-Error and Fraud Potential
Manual handling of fares creates opportunities for manipulation whether by staff or passengers. Without digital validation, enforcement depends entirely on human oversight.
Cash-Handling Risks
Physical money can be stolen, delayed in deposit, or lost without trace Manual reconciliation makes identifying discrepancies slow and unreliable.
No Instant Alerts
When irregularities occur, these systems rarely provide immediate warnings Small issues can escalate into long-term revenue damage before they’re spotted
Weaknesses in Open-Loop Fare Collection
Many agencies have adopted open-loop systems, where passengers use bank-issued cards directly While convenient, they bring operational and security drawbacks
Dependence on External Networks
Open-loop transactions rely on banks and payment processors. If their systems fail, fare collection halts, leaving operators with little control
Limited Data Control
Passenger data travel history, payment details, and more is shared across multiple parties This complicates compliance and heightens privacy risks
Greater Fraud Exposure
Lost or cloned bank cards can be misused Open-loop designs are not optimized for transit-specific risks, making fraudulent activity harder to block in real time.
Restricted Fraud-Preven
Fraud rules are defined by e mited adaptability for transit’s unique needs, such as route-based pricing or time-sensitive validation.
How Closed-Loop AFC Enhances Security
Closed-loop AFC systems operate entirely within the transit authority’s control Passengers use transit-issued cards, QR codes, or closed loop e-wallets that work exclusively inside the operator’s network
Complete Ownership of Infrastructure and Data
From ticket creation to payment settlement, every step happens inside your system No data needs to be shared with banks or outside processors, making compliance easier and reducing external risks
Centralized Monitoring
Transactions are logged and verified instantly, enabling quick detection of unusual activity such as multiple top-ups from the same device or sudden spikes in failed validations
Secure Ticketing Formats
Transit authorities can use QR codes with trip-specific validity, NFC taps with encrypted verification, or time-bound passes. These measures make duplication or misuse extremely difficult
Controlled Access and Full Audit Trails
Role-based permissions limit who can view or edit data. Every action is recorded, making investigations straightforward if irregularities occur
Strong Encryption and Timely Updates
Data is encrypted during transfer, processing, and storage Since the system is purpose-built for transit, updates and patches are deployed promptly, without third-party delays.
Open-Loop vs. Clos ity Overview
Data Ownership
Shared with banks and PSPs
Fully controlled by transit authority
Fraud Risk
Fraud Rules
Third-Party Dependency
Higher due to open card use Lower due to closed environment
Limited flexibility
Fully customizable
High Minimal
Real-Time Monitoring Inconsistent
Compliance Multi-party and complex
Ticket Security
Conclusion
Bank transaction acts as ticket
Centralized and instant
Direct and simplified
Transit-specific validation methods
Fare collection is more than just processing payments it’s a core operational system that impacts revenue, passenger trust, and regulatory compliance
The more external entities involved, the more vulnerable the system becomes. Whether dealing with fraud, privacy regulations, or revenue loss, the root cause is often a lack of control
Closed-loop AFC solutions res isibility, ownership, and strong safeguards that help transit au d transparent services.
SwiftPay’s closed-loop AFC platform gives operators complete infrastructure control, instant fraud monitoring, and built-in compliance features ensuring fare security becomes a proactive measure, not an emergency fix.
This blog was originally published at - Data Security and Fraud Prevention with Closed-Loop AFC Reach us
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