Octopus Card

The Octopus card is a rechargeable contactless smart card used in an electronic payment system in Hong Kong. Originally launched in September 1997 as a fare collection system for the city's mass transit systems, it has grown into a widely used electronic cash system for convenience stores, supermarkets, restaurants, parking garages and other point-of-sale applications. It has become one of the world's most successful e-cash systems, with over nine million Octopus-cards circulating and over 80 service vendors (June 2003). It replaced an older system called
An Octopus card, used in Hong Kong

Introduction

There are two types of Octopus card available: ordinary and personalized.

An ordinary Octopus card is anonymous and can easily be purchased at Hong Kong's Mass Transit Railway (MTR) stations and Kowloon Canton Railway (KCR) customer service counters with cash. No Hong Kong ID card or passport is required upon purchase. If an owner loses it, only the cash stored is lost. No personal information, bank accounts or credit cards are stored in the card.

A "personalized? Octopus card, in addition to all the functions of an ordinary card, can be used as a key card for access to some residential and office buildings. An owner can sign up to use a bank account to top it up the value automatically. The card is automatically topped up with HK$250 after the balance goes below zero. The card can be frozen to prevent unauthorized use should the card lost.

The card can be used on nearly all Hong Kong transportation systems, and many stores in the city, most notably, 7-Eleven convenience stores, McDonald's, other fast food restaurants and Starbucks coffee shops.

Octopus watches have also been produced and can be purchased at MTR service counters and 7-Elevens when available.

Facts and Statistics

• 10 million Octopus cards in circulation
• 8 million transactions carried out everyday
• Used by more than 95% of the Hong Kong population
• About 25% of Octopus transactions are non-transportation related
• The average amount on each card is between HK$63 to HK$65
• HK$416 million ($53.3 million) is deposited in the Octopus system at any given time (July 2000)

(Source: RFID Journal, FinanceAsia)

Operation

Because Octopus cards are contactless, a visitor to Hong Kong will find it strange to see people tapping their wallets, handbags, backpacks or jackets on the yellow and orange Octopus readers. The card can be read through common materials such as cotton or leather, for up to a few centimters away from the reader, and takes about 1/3 of a second per transaction.

An Octopus card transaction is a store and forward transaction, meaning reader units do not need round-trip communications with a central database or computer. The stored data about the transaction is transmitted by network after hours, or retrieved by a clearing device (usually a Pocket PC). The data is then sent to the Octopus Central Database.

Incorporated in 1993, Creative Star Limited (CSL), is a private company that settles accounts between the Octopus system and the operators/merchants. Because of this settlement function, CSL has a deposit-taking licence by the Hong Kong Monetary Authority (HKMA).

Technology

The Octopus system was created by AES ProData (Hong Kong) Limited, a member of the ERG Group based in Perth, Western Australia. AES Prodata is responsible for the design, build, operation, maintenance and financing of automated fare collection in the Octopus system.

The Octopus card uses radio frequency identification (RFID) technology so that users need only hold the card in close proximity of the reader. Physical contact is not required. The Sony 13.56 MHz FeliCa RFID chip is used in Octopus with over 12 million units delivered to Hong Kong. Octopus uses a nonstandard system for RFID, since there were no standards in the nascent industry during its development in 1997.

To communicate transaction information, transit stations have local area networks that connect the various components that deal with Octopus cards - turnstiles, add-value machines, analyzers and customer service terminals. These are connected to the MTRC's Kowloon bay headquarters through a frame relay wide area network. From here, all financial transactions are managed as different service providers relay their daily transction information regarding purchases, usage statistics and added value.

Special Octopus "Cards"

There is an Octopus watch which contains the "guts" of an Octopus card embedded in a plastic wristwatch. Users can simply wave their arm over the sensor. Nokia also produced an Octo-phone, which had the smartcard chip in the Xpress-on cover of a Nokia 3300 series mobile phone.

History

Two major railroad companies in Hong Kong, MTR and KCRC, wanted to upgrade their common ticket system to a modern smartcard system. To fully utilize the potential of the new system and to reduce the development cost, they decided to invite the other three major public transport operators - KMB, Citybus and the Hong Kong and Yaumatei Ferry - to join their venture.

As a result, Creative Star Limited (renamed as Octopus Cards Limited in January 2002) was established in 1994 to oversee the development and implementation of the contactless smartcard.

In 1997, the Octopus system was launched. With a single card, a commuter could travel across different transport modes without the hassles of finding exact change for individual journeys. And it has become the most popular payment method on public transit.

On June 29, 2003, Octopus-card operated parking meters went into operation to begin the effort of replacing 17,000 parking meters using the less popular e-Park smartcard. The conversion of all meters is planned to be completed by 2005.

In November 2003, Octopus Cards Ltd. secured a HK $200 million contract to help provide contactless smartcard technology in The Netherlands' system, combining the fare collection system of its five public transport companies -- rail operator Nederlandse Spoorwegen, bus and tramway operator Connexxion, public transport companies of Rotterdam (RET) and Amsterdam (GVB) and the light train system in The Hague (HTM).

Today, using the Octopus Card, you can access areas in buildings (even your own apartment), /floor accessing, staff management, paying for carparks and even facility bookings.

Comparison with other smartcard systems

The 1997-vintage Octopus system may not be particularly advanced compared to today's latest technologies, but it is one of the most successful smartcard systems around the world. There are several reasons why:

1. It is a joint venture of the major transport operators in Hong Kong. In many countries, different transportation systems develop their own card systems, giving rise to compatibility problems and restricts their popularity.
2. In many countries such as Singapore and Malaysia, smartcards are government projects and the cards double as identification cards. This gives rise to privacy problems. Indeed, lack of anonymity is one of the reasons for the failure of many cash cards, such as VisaCash.
3. Visitors to Hong Kong can easily purchase and use Octopus cards, with a full refund on unused credit. Unlike other use-it-or-lose-it stored value cards, Octopus cards are fully refundable which makes the barrier to entry very low for tourists and short stay visitors.
4. Octopus has a variety of uses beyond transit payment, including parking garage fees, vending machines, apartment building security and point-of-sale applications.

See also: Transportation in Hong Kong, Electronic money

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