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.

Name and logo

Octopus card

Traditional Chinese:	八達通
Simplified Chinese:	八达通
Cantonese Jyutping:	baat3 daat6 tung1
Mandarin Pinyin:	bā dá tōng
Literal meaning:	"eight-place pass"

The Chinese name for the Octopus card literally means "eight-place pass". Eight is a significant number in Chinese in that it is often used to indicate "many". For instance, the Chinese phrase 四面八方 ("four sides eight directions") is a common expression meaning "in all directions." Eight is also considered a lucky number in Chinese culture. The English name "Octopus card" is derived from the use of the number eight since an octopus has eight tentacles. The name is also particularly appropriate since "octopus" has the connotation of being able to grab many things at the same time and this ability is conferred upon its cardholders who can use it in many different transactions.

The logo used on the card features a Möbius strip twisted into the shape of the number 8 in order to indicate the card's "infinite" possibilities. The mathematical symbol for infinity (∞) looks like a sideways 8 and is commonly thought to be derived from the Möbius strip (although the definite origin of the symbol is unknown).

The Chinese name was selected by the head of the MTR Corporation, the parent company of Octopus Cards Limited, in a naming competition held in 1996.

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 accepts Octopus Card (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 ^*]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).

Fare grades

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

People eligible for the Student personalized card are full time local students aged between 12 and 25.

**Types of Octopus cards (except "Sold-On" (Souvenir) cards)**
Type	Colour	Cost and use
Child	Fuchsia	Children aged between 3 and 11. A card is sold for HK$70 with an initial value of HK$20. Children's fares are deducted where applicable.
Student	Purple	The MTR is the only mode of public transport that offers a discount fare for Student Octopus Cards. Student cards used to be sold for HK$100 with an initial value of HK$50, but since 1 November 2005, on-loan Student Octopus Cards are no longer available ^*. Any commuter wanting to enjoy Student Discounts must use a personalized Octopus Card with student status, and any existing cards will function as a regular adult card, with adult fares being charged from 1 February 2006 onwards.
Adult	Dark yellow (also Rainbow)	The standard version of the Octopus card. A card is sold for HK$150 with an initial value of HK$100. This colour is used for the logo of Octopus Cards Limited, the operator.
Elder	Green	Eligibility varies between different public transport companies (and even between operating routes within the same company) (for example, 60 years of age or above for Citybus, 65 for KMB); if no elder fares are available, adult fares are deducted. A card is sold for HK$70 with an initial value of HK$20.
Personalised	Rainbow	Registration is required; these cards are largely in use by students but may also be used to access schools, apartment buildings and other facilities.

Fares and special discount schemes

MTR and KCR charge less for journeys made using an Octopus card compared with using single journey 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 journey ticket.

KCR uses the Octopus card to store the status of its One-month pass scheme. Passengers who purchase the One-month pass could register their Octopus cards for unlimited ride on the specified line, and they can travel on KCR trains even their Octopus cards have insufficient (or negative) stored value.

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.

Octopus Rewards

Apart from storing the transaction records and the value remaining, the Octopus cards can also be used to earn various kinds of rewards. In the past, passengers could earn "MTR Points" for their rides on MTR to redeem collectibles or free single-ride tickets. Now the Octopus Cards Limited has also launched an Octopus Rewards scheme, enabling citizens to earn reward points for every purchase in designated shops by a ratio of HK$200 = R$1 (reward point). The Octopus card should be registered beforehand and presented in the purchase, but payment can be settled by other means. The points stored in the card could be used to pay for purchases (R$1 = HK$1) or for redeeming other products.

Personalised cards

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 function automatically as a Child, Adult or Elder card by recognising the cardholder's age stored on the card (hence accounting for concessionary fares). Student status can also be applied for by full-time Hong Kong students aged between 12 and 25. As of May 2003, there were 380,000 holders of personalised Octopus cards.

In addition to all the functions of an ordinary card, this 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 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 released by the operator, usually with tie-ins to a movie or a particular event. They are usually sold at a premium (usually ^*]100), with a limited initial stored value (usually HK$10) and cannot be refunded, but can otherwise be used as ordinary cards. Octopus has launched special cards for occasions such as the Mid-Autumn Festival, the passing of the year 2004, and the release of the movie DragonBlade and in 2006 Hello Kitty. These are becoming collectables, with the rarest, probably an Andy Lau tour card worth many thousands of Hong Kong Dollars

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 three 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" - plastic wristwatches with a Sony FeliCa IC chip embedded inside, made by a number of suppliers. Users making payments can simply wave their arm over the card reader. 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 ending 31 May 2003, the latest year in which figures are available as of 2005.

Nokia also produced an Octo-phone, which has the smartcard embedded in the "Xpress-on" covers used in the Nokia 33nn series of mobile phones, an example being the popular Nokia 3310 model.

Refunding an Octopus card

Octopus cards are highly popular with tourists (including day-travellers from Shenzhen and the rest of Mainland China), which explains how there are twice as many Octopus cards in circulation as there are people living in Hong Kong (although some people own more than one card). Surveys by the MTR show that this is because the deposit and the remaining value on the card are fully refundable, except for a HK$7 administrative charge for cards refunded within 3 months after issue, which was introduced on 1 November 2004 in order to curb this practice. (For personalised cards the charge is HK$10, for cards issued after 1 November 2004 or those refunded within five years of issue.)

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.

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 (KMB) (12.4%), Citybus (5%), New World First Bus (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 unrelated to transport. According to HKMA, ^*]416 million (USD 53.3 million) is deposited in the Octopus system at any given time (as of 2000).

History

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 Kowloon-Canton Railway Corporation (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 MTR/KCR 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.

Mass Transit Railway Corporation (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 Hongkong and Yaumati Ferry (HYF) 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 most of its bus routes transferred to NWFB).

The Octopus system was launched after three years of trials on 1 September 1997. 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.

In January 2001, a new shareholders' agreement was signed and the shares of HYF in the operator was transferred to NWFB 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 29 June 2003, the Octopus card found another application when the Hong Kong Government started to replace all its 18,000 parking meters with a new Octopus card operated system. The replacement was completed on 21 November 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 (USD 25.64 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).

Adoption of the Octopus card

The Octopus system was launched in 1997, and 3 million cards were issued within the first three months. The main reason for the quick success of the system was that the MTR and KCR required that all holders of common stored value tickets replace their tickets with Octopus cards in three months or have their tickets made obsolete, thus forcing their combined base of 3.3 million commuters (2.2 million for the MTR, 1.1 million for the KCR) to switch quickly. Another reason is the coin shortage in Hong Kong after 1997; there is a belief that old coins in Hong Kong will appreciate in value, so many people stockpiled coins and waited for their value to increase. By November 1998, 4.6 million cards were issued, and this rose to 9 million by January 2002.

The Octopus system was quickly adopted by other Creative Star joint venture partners, and KMB reported that by 2000, most bus journeys were completed using an Octopus card, with very few coins used. (Boarding a bus in Hong Kong requires giving exact change; this can be cumbersome. For example, the March 2005 standard cost of a cross-harbour journey was HK$8.90, which required a minimum of six coins.)

One of the key factors resulting in the success of Octopus cards is ubiquity: the card received the full backing of all transport operators in a particular area, facilitating widespread acceptance. This model has been adopted by the Suica system for JR East and the ICOCA system for JR West.

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.

SmarTrip on Washington, DC's Metro system was the first system in the United States to use smart card technology.

The Chicago Card on Chicago's CTA also uses Smart Card technology, allowing riders to touch their card to turnstiles to enter the system.

Boston's MBTA is in the process of upgrading their fare system; the effort began in early 2005 and is expected to be complete by mid-2006. The Charlie Card, a contactless Smart Card similar to the Octopus card, will be part of that system.

Atlanta's MARTA is introducing the Breeze Card in 2006.

Toronto's TTC and eight other transit systems in the GTA are in the process of upgrading their fare system; the effort began in early 2005 and first phase of the system will be implemented by early 2007. The GTA Farecard will be similar to the Octopus card and will provide a common transit fare collection system for nine transit systems serving the region.

In Santiago, Chile, the card is used "multivia" (multiroute, in english), which is used in the Metro (Underground) of the city. Use will soon expand throughout the city's transportation network, Transantiago, in October, 2006.

Future developments

On 27 June 2006, the first trial of taxis equipped with Octopus was launched in the New Territories with the Yellow Taxi Group and widely welcomed by the public and the local press.

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 dollars.