Hong Kong embrace the Octopus card
The Star - Thursday, 20 November, 2002
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FOR years, the notion of a cashless society has been a futurist's dream deferred almost everywhere - except, to some extent, in Hong Kong.

Here, just about everyone carries an Octopus card - a rechargeable, contactless card that is passed over a scanner to access almost every train, bus or ferry.

The territory's 6.75 million inhabitants make nearly seven million Octopus transactions each day, worth about HK$48mil (US$6.12mi1 or RM23.3mil).

And while cash remains king in this commercial hub, an increasing number of retail merchants, from Starbucks to fast-food chains and 7-Eleven, accept the Sony-made card.

Still, getting around on the city's sprawling public transportation network accounts for over 90% of Octopus transactions.

Hong Kong's embrace of the Octopus card, which requires an up-front deposit of HK$50 (US$6.41 or RM25), results from a confluence of factors unique to the city.

While trials or early stage deployments of similar systems have been made in Japan, Singapore, Rome and elsewhere, no major market has replicated the breadth or depth of Hong Kong's Octopus experience.

The United States, especially, lags behind Asia and Europe in embracing smartcards, notes Eric Tai, chief executive of Hong Kong's Octopus Cards Ltd.

"In the United States, I'm sorry to say, there's nothing imminent," Tai said.

"Every city is different. We are blessed with a number of different ingredients that have made us successful."

Many carriers, one card
Hong Kong has numerous transport firms plying its roads, rails and waterways. But early on, most agreed to sign on to the Octopus system instead of trying to come up with their own card.

"It's not used by the operators as a product differentiator, but as a common service for all customers," said Tai.

Thus, when it was launched in 1997 by a group of mass transit firms, Octopus instantly had a big potential market.

Nearly every Hong Konger, including the car-owning minority, uses public transport at least once in a while, whether it is the subway, bus, historic Star Ferry, or a train to the airport or to the border with mainland China.

If competing bus or ferry systems each issued their own card, the system could never have built critical mass.

Tai noted that, unlike government-owned mass urban transit operators elsewhere, most bus, ferry and rail firms here are privately or quasi-governmentally owned.

"They are much more profit-driven, rather than subsidy-driven," he said.

And although Hong Kong is partly spread across islands, the territory is compact and densely populated, making it easier and cheaper to implement a system to which nearly everyone will have access.

Octopus says more than 95% of Hong Kong residents aged 15-65 carry a card.

Simple, fast
The elegance of the Octopus card is its simplicity.

It does not require contact to be read. At rush hour, women can be seen passing entire handbags over scanners, also made by Sony, as they race through subway gates.

It's almost as easy for men, who don't need to remove the card from their wallet.

Each microchip-embedded card contains an electronic purse. Unless a holder chooses a per­sonalised card, his or her identity is unknown.

According to Tai, the contactless system takes only 0.3 seconds to register a payment, compared with one or two seconds for a contact card, not counting insertion and extraction time.

He said each card has a poten­tial life span of roughly 10,000 transactions.

Card value can be replenished several ways, and every transac­tion is settled by the end of the day.

In expanding the card's use for retail payments, Tai said Octopus has been "reasonably" successful. Typically, the company will col­lect roughly 1% of the value of a retail purchase made with a card. Octopus transactions average less than HK$10 at the city's ubiquitous Maxim's cake shops, nearly HK$30 at Starbucks and more than that in the express lanes of Hong Kong's dominant supermarket chain.

"We're not out there to get the larger payments market. We see ourselves as a micropayments operator," said Tai.

The next frontier for Octopus is as a security device. Already, some 30,000-40,000 cards are used as main door access devices for resi­dents of the housing estates where many Hong Kongers live. - Reuters