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.

1. How Closed-Loop AFC Systems Ensure
Data Security and Prevent Fraud
Security Risks in Manual and Semi-Automated Fare Collection.......................................1
Weaknesses in Open-Loop Fare Collection........................................................................ 2
How Closed-Loop AFC Enhances Security......................................................................... 3
Open-Loop vs. Closed-Loop AFC: Security Overview....................................................... 4
Conclusion..............................................................................................................................4
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.

2. Lack of Transparency and Tracking
Without real-time transaction logs, it’s difficult to know exactly 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.

3. Restricted Fraud-Prevention Options
Fraud rules are defined by external providers, often with limited 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.

4. Open-Loop vs. Closed-Loop AFC: Security Overview
Factor Open-Loop AFC Closed-Loop AFC
Data Ownership Shared with banks and
PSPs
Fully controlled by transit
authority
Fraud Risk Higher due to open card use Lower due to closed environment
Fraud Rules Limited flexibility Fully customizable
Third-Party
Dependency
High Minimal
Real-Time Monitoring Inconsistent Centralized and instant
Compliance Multi-party and complex Direct and simplified
Ticket Security Bank transaction acts as
ticket
Transit-specific validation
methods
Conclusion
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.

5. Closed-loop AFC solutions restore that control. They deliver visibility, ownership, and strong
safeguards that help transit authorities run secure, efficient, and 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
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