Octopus Card

The Octopus card is a rechargeable contactless stored value smart card used for electronic payment in online or offline systems in Hong Kong. Originally launched in September 1997 as a fare collection system for the city's mass transit system, the Octopus card system has grown into a widely used electronic cash system used not only for virtually all public transport in Hong Kong, but also for making payment at convenience stores, supermarkets, fast-food restaurants, on-street parking meters, car parks and many other point-of-sale applications (e.g. service stations and vending machines). In addition the system is used for access control to offices, schools and apartments. It can even be used to donate money to charities. Using a card involves simply holding the card in close proximity above, or on, an Octopus reader, and cards can be recharged with cash at add-value machines or over the counter in shops (notably 7-Eleven and Circle K), or directly through credit cards and bank accounts.

Octopus has become one of the world's most successful electronic cash systems, with over 13 million Octopus cards in circulation (nearly twice Hong Kong's population) and over nine million transactions per day, with nearly 300 service vendors (as of January 2006). The operator of the Octopus system, Octopus Cards Limited, a joint venture between MTR Corporation and other transport companies in Hong Kong such as KCR, KMB, and Citybus. Octopus's international arm, Octopus Knowledge Limited has won a contract to extend Octopus-style systems to the Netherlands.

Obtaining and using an Octopus card

An on-loan Octopus card can be purchased at Mass Transit Railway (MTR) and Kowloon Canton Railway (KCR) stations. No identification is required. If an owner loses a card, only the stored value of the card is lost. This type of Octopus card is anonymous; no personal information, bank account or credit card details are stored on the card.

Making or recording a payment using the card (eg. by passing through a MTR or ferry ticket gate, boarding a bus, alighting from a tram, or purchasing items from various outlets) is done by holding the card against or in close proximity to an Octopus card reader (which usually bears a yellow and orange colour scheme or logo similar to the card itself). After a brief moment (about 0.3 seconds per transaction), the reader will acknowledge payment by emitting a beep sound, and display the amount deducted and the remaining balance of the card. A higher pitched sound will be emitted if the card is not accepted, i.e. if the stored value is insufficient (below -HK$35), or if the reader is unable to read the card (owing to interference or the card being removed too quickly). Concession users are also acknowledged by a higher pitched beep on all forms of transport barring the MTR, which plays three notes in succession. MTR and KCR systems note the entry point of a user when a card is swiped, and will deduct the appropriate amount when the user swipes their card again at the exit point.

Value can be added to the card using add-value machines located at all stations in the MTR and KCR networks, or with the help of the cashiers at any merchant that accepts Octopus Cards (example: supermarkets or convenience stores) and MTR and KCR service centres. The add-value machines accept bank note or ATM card through EPS.

As Octopus cards do not require physical contact with readers, and can be read from up to a few centimetres away through common materials such as cotton or leather; visitors to Hong Kong may find it strange to see people holding their wallets, handbags, backpacks or jackets on or near readers. As with the other products, you may even see people waving their cellphone, watch or even a keychain over the Octopus reader.

The card can be used to pay fares or to make purchases for nearly all Hong Kong transportation systems, and at many stores in the city, most notably, 7-Eleven, McDonald's, convenience stores, other fast food restaurants and Starbucks coffee shops. A large number of vending machines and self-service kiosks in Hong Kong accept Octopus as payment; these range from beverage vending machines to payphones and photo-booths — they can even be used to purchase 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 value of HK$50. The maximum negative value on a card is HK$35; this feature is implemented to allow cardholders to use a card with an insufficient value to make one last trip — even if the balance on the card is only at, say, HK$0.10 (the maximum cost of a trip on any of the rail networks except the Airport Express and first class of the KCR East Rail is HK$34.8, for an East Rail trip from East Tsim Sha Tsui in Kowloon to Lo Wu on the border with mainland China at Shenzhen).

Back-end technology and operations

The Octopus system was designed by MTR's own experts and through an open tender, AES ProData (Hong Kong) Limited, now known as ERG Transit Systems, was selected as the lead supplier. ERG was contracted to build a number of the components, including the back-end systems. Operations, maintenance and development is undertaken by Octopus, and in 2005, Octopus replaced the central transaction clearing house with its own system.

The Octopus card uses the Sony 13.56 MHz FeliCa radio frequency identification (RFID) chip (and other related technology); and Hong Kong is the home of the world's first major public transport system using this technology. This is a "touch and go" system, so users need only hold the card in close proximity of the reader, and thus 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 30 and 100 mm 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 encryption for all airborne communication and it uses two-way authentication based on public key infrastructure (PKI). In other words, data communications to and from the card are only established when mutually authenticated security handshaking is verified followed by transfer of encrypted data.

Comparison with other electronic cash systems

Mondex specifically cited the widespread popularity of Octopus as the reason for withdrawing from the Hong Kong market in 2002. This is despite the fact that they launched their cards one year before the Octopus (in 1996), and had the backing of two of Hong Kong's biggest banks, HSBC and its subsidiary Hang Seng Bank. Academic studies suggest that the biggest cause was the lack of a compelling reason on the commuters' part to adopt the Mondex system, unlike Octopus, which had the solid backing of public transport companies and hence commuters and other travellers using their service.

An additional drawback was that Mondex cards required 5 seconds to process, compared with 0.3 second for a "touch and go" Octopus card. 84% of respondents in a University of Auckland survey attributed the success of Octopus to quick service.

Octopus cards are also anonymous (except some specified purposes). Lack of anonymity is one of the reasons cited for the failure of many cash cards, such as VisaCash, which has the backing of two of Hong Kong's biggest banks, Bank of China and Standard Chartered Bank.

Comparison with other transit card systems

Mass transit agencies have been using stored value, pre-paid cards for electronic ticketing since the 1970s. This market started to move from magnetic stripe technology to smart cards since the early 1990s; Hong Kong was actually the first major system to change over.

The Sony FeliCa technology used by Octopus is also used by Singapore's EZ-link card for its MRT and bus systems, Japan's Suica on the JR East, as well as the Nagasaki Smart Card system in Nagasaki, Japan. All these however use more up-to-date versions of the technology, compared with the older Octopus system. EasyCard from Taipei's TRTS is explicitly modelled after Octopus cards, and Octopus Cards Limited worked on the development of Shenzhen Metro's Shenzhen TransCard. A number of other transport related smart card systems have used Octopus cards as a model in their development, including the Oyster Card for transport in London.

Seoul also uses the T-Money system, which is used in the same way as the Octopus card. The T-Money system can be used on all Seoul Metropolitan Subway lines, and can also be used to transfer into the bus system in Seoul. Other such cards exist, which enables its owner to use it widely across Korea, including most of the bus systems in the Gyeonggi-do province.

Future developments