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, fast food restaurants, parking garages and other point-of-sale applications, as well as to control access in offices, schools and apartments. Using a card simply involves tapping it against an Octopus reader, and recharging can be done with cash at add-value machines, or via directly debiting credit cards and bank accounts.

Octopus has become one of the world's most successful electronic cash systems, with over 12 million Octopus cards in circulation (nearly twice that of Hong Kong's population) and over eight million transactions per day, with over 100 service vendors (as of January 2005). The operator of the Octopus system, Octopus Cards Limited, a joint venture between MTR Corporation and other transport companies in Hong Kong, has won a number of contracts to extend Octopus-style systems to the Netherlands and Changsha.

Getting and using an Octopus card

An on-loan Octopus card is anonymous and can easily be purchased at Mass Transit Railway (MTR) and Kowloon Canton Railway (KCR) stations. No identification is required. If an owner loses it, only the cash stored is lost. No personal information, bank accounts or credit cards are stored in the card.

Payment is made (when boarding a bus, passing through a ticket gate or buying groceries) by tapping the card against an yellow and orange Octopus card reader, and the ticket amount is deducted from the card. More money can be added to the card via "add-value machines" located at all stations in the MTR and KCR networks, or with the help of cashiers at supermarkets, convenience stores and MTR and KCR service centres.

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 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 0.3 seconds per transaction.

The card can be used to pay fares or to make purchases 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. A large number of vending machines and self-service kiosks in Hong Kong accept Octopus for payment; these range from beverage vending machines to payphones, photo-booths and even travel insurance (for HK$10 per person, from the Bank of East Asia). Ricoh, Minolta and Fuji Xerox offer photocopiers that support payment by Octopus.

An anonymous on-loan Octopus card can store a maximum of HK$1,000, and has a deposit of HK$50. The maximum negative value on a card is HK$35; this allows cardholders to take one trip even if the balance on the card is only HK$0.01. (The maximum cost of a trip on any of the rail networks is HK$34.8, for a trip from East Tsim Sha Tsui (KCRC) to Lo Wu (KCRC)).

Fare grades

Anonymous Octopus cards are categorised into different fare categories to account for concessionary fares offered by different public transport companies.

Fares and special discount schemes

MTR and KCR charge less for journeys made using an Octopus card compared with using single tickets. For example, the cost of a single journey from Chai Wan to Tung Chung is HK$23.1 with an Octopus card, and HK$26 with a single ticket.

Other public transport operators have also offered discounts that specifically require the use of an Octopus card: for example, KMB offers a 10% discount on trips costing more than HK$15. Transfer fares (discounted fares on the second leg of a journey requiring a change of buses or changing between two modes of transport, e.g., from MTR to a minibus) also require the use of an Octopus card.

Personalised cards

Obverse side of a rainbow-coloured Octopus card

In addition to the standard, "on-loan" Octopus cards, which are anonymous, a rainbow-coloured personalised Octopus card is also available; these cards are imprinted with the cardholder's name and photograph (if desired), and functions automatically as a Child, Student, Adult or Elder card by recognising the cardholder's age stored on the card, automatically accounting for concessionary fares. As of May 2003 (the latest available figure), there were 380,000 holders of personalised Octopus cards.

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, primarily those built or managed by MTR Corporation. The card can be frozen to prevent unauthorized use should the card be lost. According to Octopus Cards Limited, City University of Hong Kong as well as more than 50 secondary schools in Hong Kong use the Octopus card to record the attendance of students, in lieu of roll calls, and to manage library books.

Personalised cards are now automatically issued when a student applies for concessionary privileges; some non-personalised student cards remain in circulation.

Automatic Add Value Service

The Automatic Add Value Service (AAVS) can be added to a personalised card or an ordinary card. The owner of an Octopus card can sign up to use a local bank account or credit card to top up the value on the Octopus automatically. The card is automatically topped up with HK$250 after the balance goes to or below zero. Each card can be automatically topped up once every 24 hours. As of 2005, 20 local banks including HSBC and Bank of China (Hong Kong) offer this service.

Souvenir cards

"Special edition" souvenir cards (referred to as "sold on cards") are frequently by the operator, usually with tie-ins to a movie or a particular event. They are usually sold at a premium (usually HK$100), with limited initial stored value (usually HK$10) and cannot be refunded, but can otherwise be used as ordinary cards. Such specials have included a card for the Mid-Autumn Festival, for the year 2004, and for the movie DragonBlade.

Special purpose cards

The MTR's "Airport Express Tourist Octopus - 3-day Hong Kong Transport Pass" includes two versions: a HK$220 card with 1 free Airport Express single ride included and a HK$300 card with 2 free single rides included. The free journeys are valid for 180 days from the date of purchase. Both versions allow 3 days of unlimited rides on the MTR, HK$20 in usable value (for non-MTR rides or other uses) and a HK$50 refundable deposit.

A special Octopus card, called the "MTR Airport Staff Octopus" is available for staff at Hong Kong International Airport for cheaper commuting between the airport and town stations via the MTR's Airport Express.

Octopus gadgets

Octopus sells "Octopus watches" which contain the Sony FeliCa IC chip embedded in a plastic wristwatch, made by EganaGoldpfeil. Users can simply wave their arm over the sensor. These watches can be purchased at MTR service counters and convenience stores when available. 11,482 transponder watches were delivered to Octopus Cards Limited for the year ended May 31, 2003, the latest year in which figures are available as of 2005.

Nokia also produced an Octo-phone, which had the smartcard embedded in the "Xpress-on" covers used in the Nokia 33nn series of mobile phones, such as the popular Nokia 3310 phone.

Back-end technology and operations

Main article: Sony FeliCa

The Octopus system was designed by AES ProData (Hong Kong) Limited, now known as ERG Transit Systems, a member of the ERG Group based in Perth, Western Australia. ERG has a contract for the design, build, operation, maintenance and financing of the back-end systems.

The Octopus card uses the Sony 13.56 MHz FeliCa radio frequency identification (RFID) chip and related technologies, so that users need only hold the card in close proximity of the reader. Physical contact is not required. Data is transmitted at up to 212 kbit/s (the maximum speed for Sony FeliCa chips), compared with 9.6 kbit/s for Mondex and Visa Cash.

Octopus uses a nonstandard system for RFID instead of the ISO 14443 standards, since there were no standards in the nascent industry during its development in 1997. The operating range of the reader/writer is between 30mm and 100mm depending on the type of model being used.

Clearing and settlement

Octopus is specifically designed so that card transactions are relayed for clearing on a store and forward basis, without any requirement for reader units to have realtime round-trip communications with a central database or computer. (As of 2005, the database systems are provided by Oracle Corporation). The stored data about the transaction may be transmitted by network after hours, or in the case of offline mobile readers may be retrieved by a hand held device, for example a Pocket PC.

In practice, different data collection mechanisms are used by different transport operators, depending on the nature of their business. The MTR equips its stations with local area networks that connect the various components that deal with Octopus cards - turnstiles, add-value machines, check value machines and customer service terminals. Transactions from these stations are relayed to the MTR's Kowloon Bay headquarters through a frame relay wide area network (as of 2005, provided by PCCW), and hence onwards to the central clearing house system (CCHS) for clearing. Similar arrangements are in place for KCR stations and for retailers such as 7-Eleven. Handheld devices are used to scan offline mobile readers, including those installed on minibuses. Buses either use handheld devices or a wireless system, depending on operator.

Privacy and encryption

The Octopus card uses strong encryption for all airborne communication and it uses two-way authentication based on public key infrastructure. In other words, data communications to and from the card is only established when mutually authenticated security handshaking is verified followed by transfer of encrypted data.

Operator

Main article: Octopus Cards Limited

As of 2005, Octopus Cards Limited (OCL), the operator of Octopus, is a joint-venture between six transit companies, namely MTR Corporation (57.4%), KCR (22.1%), Kowloon Motor Bus (12.4%), Citybus (5%), NWFB (3.05%) and First Ferry (0.05%). Since the Government of Hong Kong owns nearly three-quarters of MTR and 100% of KCR, it is the biggest effective shareholder in the company, although the business is operated on a commercial basis.

OCL has been aggressively expanding the use of Octopus in Hong Kong, and has won a number of contracts extending Octopus-style systems overseas, including the Netherlands and Changsha in Mainland China.

OCL also settles accounts between the Octopus system and the operators/merchants. Initially, OCL was restricted to having 15% of Octopus card transactions being non-transport, as it operated as an "exempt card" under Hong Kong's Banking Ordinance, but OCL was later granted a deposit-taking licence by the Hong Kong Monetary Authority (HKMA), which allowed 50% of its transactions to be unmrelated to transport. According to HKMA, HK$416 million ($53.3 million) is deposited in the Octopus system at any given time (as of 2000).

History

An Octopus reader on NWFB

The MTR network adopted a system of recirculated magnetic plastic cards when it started operations in 1979. These cards were either used as single journey tickets or as stored value tickets. The KCRC adopted the same magnetic cards in 1984, and the stored value version was renamed Common Stored Value Tickets.

In 1989, the Common Stored Value Tickets system was extended to KMB buses providing a feeder service to KCRC stations and to Citybus, and was also extended to a limited number of non-transport applications, such as payments at photobooths and for fast food vouchers.

MTR eventually decided to adopt more advanced technologies, and in 1993 announced that it would move towards using contactless smartcards. To gain wider acceptance, MTR and KCRC invited three other major franchised transport operators in Hong Kong, namely KMB, Citybus and the Hong Kong and Yaumati Ferry to form a joint venture company in 1994, known as Creative Star Limited (renamed Octopus Cards Limited in January 2002). (The only major public transport operator at the time not to join was China Motor Bus, which pulled out of public transport altogether in 1998, in favour of its property development business, and had all of its bus routes transferred to NWFB).

In 1997, the Octopus system was launched after three years of trials. Initially for use on services offered by the five joint venture partners, it was quickly extended to other transport services. In 2000, the Hong Kong Monetary Authority granted a deposit-taking company license to the operator, removing previous restrictions that prohibited Octopus from generating more than 15% of its turnover from non-transit related functions.

A new shareholders' agreement was signed in January 2001 and the shares of Hong Kong and Yaumati Ferry in the operator was transferred to NWFB and and New World First Ferry. In conjunction with the privatisation of its parent company, MTR Corporation, Octopus Cards Limited was also transformed from its previous non-profit making status to a profit making enterprise.

On June 29, 2003, Octopus-card operated parking meters went into operation to begin the effort of replacing 17,000 government parking meters using the less popular e-Park smartcard. The conversion of all meters was completed on November 21, 2004. A number of government facilities including public swimming pools and sports facilities also adopted the Octopus system at around the same time.

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

Future developments

• Plans were announced in February 2003 by the Government of Hong Kong to introduce Octopus payments to taxis. As of 2005, such plans have stalled owing to arguments over accounting for tips.
• MTR has signed an agreement with the developer of the Shenzhen Metro's automatic fare collection system towards making Octopus cards compatible with the fare collection system in Shenzhen Metro, which would require that the systems automatically convert fares denominated in Renminbi into Hong Kong dollar.

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 reducing 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

• Mondex and Visa Cash
• MTR, KCR, KMB, Citybus, NWFB and First Ferry
• Transportation in Hong Kong
• Electronic money
• Shenzhen Metro
• Smart card and card standards

References

• NTT DoCoMo and Sony team up on contactless smart cards for mobile phones (http://www.computerweekly.com/Article126026.htm) Computer Weekly, 28 October 2003. Retrieved February 1, 2004.
• Working paper. Octopus and Mondex - the Social Shaping of Money (http://www.sociology.ed.ac.uk/finance/Papers/Siu_Octopus.pdf) Lucia Liu, April 2002. Retrieved February 1, 2004.
• ERG Group FY2004 annual report (http://www.erggroup.com/invst_relations/reports/annrept/index.htm). Retrieved February 1, 2004.
• Granting of authorisation to Creative Star Limited as a deposit-taking company (http://www.info.gov.hk/hkma/eng/press/2000/20000425e4.htm) Hong Kong Monetary Authority press release, 25 April 2000. Retrieved February 1, 2004.
• Mondex press release citing failure in Hong Kong (http://www.mondex.com.tw/news_releases/intro_press_center_20030807_1.htm). (Chinese only). Retrieved February 1, 2004.
• Modern Computer press release on cooperation with MTR (http://www.mcm.com.cn/english/news/shownews1.asp?id=12) From the homepage of Shenzhen Modern Computer, the provider of automatic fare collection systems to Shenzhen Metro. Retrieved February 1, 2004.
• Extending Octopus to Shenzhen (http://www.hkcd.com.hk/20031108/ca618359.htm). Hong Kong Commercial Daily, November 8, 2003. (News report in Chinese). Retrieved February 1, 2004.
• Connecting fare systems in Guangzhou, Shenzhen and Hong Kong (http://www.southcn.com/news/dishi/shenzhen/ttxw/200501190142.htm). Nanfang Daily, January 19, 2005. (News report in Chinese). Retrieved February 1, 2004.
• Where to focus RFID privacy concerns (http://radio.weblogs.com/0121943/2004/03/09.html). By Peter Winer, Big Chief Partners, Inc. Retrieved February 1, 2004.
• Question on Octopus card reserve fares (http://www.info.gov.hk/gia/general/200305/21/0521207.htm). From the homepage of the Legislative Council of Hong Kong, May 21, 2003. Retrieved February 1, 2004.

• Case study from the RFID Knowledgebase (http://www.idtechex.com/knowledgebase/en/casestudy.asp?freefromsection=11). Retrieved February 1, 2004.
• The Octopus System - The Hong Kong Mass Transit System (http://lnweb18.worldbank.org/External/lac/lac.nsf/Sectors/Transport/0D8952C28A2975AE852568B20079C904?OpenDocument). World Bank presentation from MTR. Retrieved February 1, 2004.
• Hong Kong Smart Card System (http://lnweb18.worldbank.org/External/lac/lac.nsf/Sectors/Transport/D5A576A039A802C0852568B2007988AD?OpenDocument). World Bank presentation. Retrieved February 1, 2004.

From Octopus cards homepage.

• Press release on Nokia Octo-phone (http://www.octopuscards.com/eng/general/news/20020326.jsp). From Octopus cards homepage. Retrieved February 1, 2004.
• Special limited edition 2004 Octopus card (http://www.octopuscards.com/eng/general/news/e20041119.jsp). From Octopus cards homepage. Retrieved February 1, 2004.
• Architecture of the "central clearing house system" (http://business.octopuscards.com/eng/partner/images/tech_cchsa_off.gif). From Octopus cards homepage. Retrieved February 1, 2004.

Further information

• List of Octopus operated parking meters in Hong Kong (http://www.info.gov.hk/td/eng/transport/octopusmeter.html). From the homepage of the Transport Department of the Government of Hong Kong. Retrieved February 1, 2004.

External links

• octopuscard.com (English) (http://www.octopuscard.com/eng/index.htm)
• Sony FeliCa homepage (English) (http://www.sony.net/Products/felica/index.html)
• ERG Group homepage (http://www.erggroup.com)
• KonicaMinolta photocopy machines with Octopus cards (http://konicaminolta.com.hk/bt/eng/products/octopus/detail_copys.html)
• East-West Consortium (the Netherlands) (http://www.eastwestconsortium.nl)
• EganaGoldpfeil Europe Holdings GmbH (http://www.egana.de/)

Octopus Automatic Add Value Service

• International Bank of Asia (http://www.iba.com.hk/2003/html/cc_oaavs02_e.htm)
• HSBC (http://www.hsbc.com.hk/hk/personal/card/octopus/default.htm)

de:Octopus-Karte fr:Carte_Octopus ja:オクトパス zh:八達通