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The Open Loop concept consists in taking advantage of the existing payment means infrastructure, and treating mass transit payment as just any other transaction at a merchant. This way the transportation operator does not have to spend valuable resources to process payments for one-time issuers.
Nowadays, several major transportation operators in the USA are deploying open loop payment, accepting banking cards issued by regular financial institutions as a means of payment for transportation services.
Once the US market will have completed the EMV migration (i.e. all credit and debit cards will be smart cards), Open Loop will become a standard solution for mass transit payment, achieving one more step to displace cash.
All of this, and a lot more, is described in Smart Insights White Paper “Open Loop in US Transportation Systems”. The White Paper can be downloaded free of charge here.