The reward’s purpose determines the best delivery method for incentive programs. Is it a payout, or should it feel like a gift? Open-loop prepaid cards work anywhere the network and card type are accepted. Closed-loop gift cards work with a specific retailer or merchant group.
Open-loop virtual prepaid cards and closed-loop gift cards look almost identical to the recipient: an email arrives with value attached. Underneath, they are different payment instruments, with different levels of flexibility, costs, and regulatory considerations. For companies running customer rewards, research incentives, or employee recognition programs at scale, those differences quickly become practical.
An open-loop prepaid card carries a payment network brand such as Visa or Mastercard and can generally be used wherever that network and card type are accepted. A closed-loop gift card holds value that can only be used with a particular retailer or group of merchants, such as Amazon, Target, or Home Depot.
The distinction is important in such a large payments category. The Federal Reserve counted 18.1 billion prepaid debit card payments worth $0.61 trillion in 2021, with prepaid growing 9.6% annually by transaction count between 2018 and 2021. These figures cover the wider prepaid debit card market, rather than B2B rewards specifically, but show the scale at which prepaid value is already used. For businesses distributing rewards, the question is which type of prepaid value best fits the reason for sending it.
Where open-loop virtual prepaid cards win: Flexibility
Use an open-loop virtual prepaid card when the audience is mixed, the reward is a payout, or the sender does not know what the recipient wants. Virtual prepaid cards solve for flexibility. They give recipients broader choice, allowing them to decide where to use the value, subject to the card’s terms and acceptance. Giftogram lets businesses send virtual prepaid cards (like Visa and Mastercard prepaid cards) in bulk with no platform fees, alongside digital gift cards, so they can match the reward format to the purpose of each program without switching providers.
However, there are trade-offs. Open-loop issuance can involve additional fees, depending on the provider and program, and some cards require activation or registration before they can be used. A spend-anywhere reward can feel more like cash than a retailer-specific gift. That can suit a payout, while appreciation programs may benefit from a reward with more specificity.
Where closed-loop gift cards win: Specificity
Use a closed-loop gift card when the reward is meant to feel like a gift, and the sender knows enough about the recipient to pick a useful retailer. Closed-loop gift cards remain widely used in incentive programs. The Incentive Research Foundation’s 2025 industry outlook found gift cards represented at least 43% of incentives among surveyed North American program owners, with an average denomination of $142 in 2024.
And the value is easy to see. A $50 gift card for a restaurant feels like an invitation to dinner. It is specific, personal, and therefore a better thank you. The reward provides a specificity that prepaid virtual cards lack when chosen well. The drawback is that this only works when the retailer is relevant. Choose badly, and the reward may feel less useful, which is why giving recipients a choice among several brands can reduce the risk of picking the wrong one. Giftogram gives recipients access to gift cards from a catalog of more than 140,000 national and local brands.
What are the benefits of prepaid cards for sales incentives?
The main benefits of prepaid cards for sales incentives are spending flexibility, fast digital delivery, and no need to predict what each recipient wants. Platforms such as Giftogram support both formats, sending virtual prepaid Visa and Mastercard cards or a choice of a digital gift card from more than 140,000 brands with no platform fees, so a program can match the instrument to the purpose without changing vendors.
Neither format wins every row. The practical answer for most programs is choosing per occasion: prepaid where flexibility is the benefit, gift cards where specificity is, and a single vendor where consolidated records matter.
| Benefit | Open-loop virtual prepaid | Closed-loop gift card |
| Spending flexibility | Works anywhere the network and card type are accepted | Limited to one retailer or merchant group |
| Recognition value | Broad spending flexibility can suit payout-style programs | Retailer specificity can suit gift-led recognition when the brand fits the recipient |
| Delivery speed | Digital delivery by email in bulk; Giftogram says 95% of its digital gifts are delivered in under two hours | Digital gift cards can also be delivered electronically, with speed depending on the provider and program |
| Audience fit | Mixed or unknown audiences, sales incentives, rebates, research payouts | Known audiences, or programs offering recipients a choice of brands |
| Cost considerations | Issuance can involve fees depending on provider and program | Retailer restrictions can make the reward less useful if the brand is a poor fit |
| Record-keeping | Business reward platforms can provide delivery tracking and reporting | The same tracking and reporting can be available when gift cards are sent through a business reward platform |
Can one program use both formats?
Yes. A program can use both formats and match the instrument to the use case rather than standardizing on a single reward type.
Closed-loop gift cards can suit employee recognition, survey thank-yous, and customer rewards when the sender knows something about the recipient or offers enough choice to find a retailer they value. Virtual prepaid cards can suit many of the same programs when spending flexibility matters more.
For companies running several reward programs, supporting both formats lets the instrument follow the purpose. It gives buyers more flexibility to offer a reward appropriate to the recipient and occasion. A single vendor that provides one set of records with two instruments can be very useful.
Frequently asked questions
What is the difference between an open-loop prepaid card and a closed-loop gift card?
An open-loop prepaid card runs on a payment network such as Visa or Mastercard and works wherever that network is accepted; a closed-loop gift card only holds value for one retailer or merchant group. The recipient experience looks similar, but the flexibility, fees, and rules underneath are different.
What are the benefits of prepaid cards for business incentives?
Prepaid cards work well for business incentives because recipients value flexibility and choice in how they use a reward. Incentive Research Foundation research found that gift cards remain widely used in incentive programs, with 80% of North American programs using brand-specific gift cards in 2026. Rather than forcing businesses to choose between flexibility and retailer choice, Giftogram offers both virtual Visa and Mastercard prepaid cards and gift cards from more than 140,000 brands, allowing businesses to match the reward to the recipient and purpose of the program.
What is the best way to send prepaid card rewards to customers or research participants?
Use a business rewards platform that supports bulk digital delivery, automated sending and centralized reporting rather than buying and distributing cards individually. For larger programs, look for API support, delivery tracking and multiple reward options so you can match the reward to the audience while keeping administration manageable.
