Hong Kong? Experience with the Octopus Card

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Smart Cards ecommerce
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Perceptions
Were C Solution looking for a problem C
Expensive and inflexible The breakthrough! C
Platform for new services C Cost-effective and
very flexible
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Smart Cards ecommerce
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Interface Trends
Platforms C Attended POS C Unattended POS C
Remote POS Interfaces C Contact C
Contactless C Combination
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Smart cards ecommerce
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Functionality

• C Value management e.g. EMV, e-purse
• C Identity or reputation management digital ID
  
• locally or remotely

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Smart Cards ecommerce
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Key Attributes
C Secure (or economically secure) C Easy to
operate C Standards terminals, drivers,
specifications e.g. PKCS11, PC/SC, EMV,
CEPS C Portable
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Smart Cards ecommerce
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Multi Channel Access
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Smart cards in ecommerce
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Market Forecasts
Source Frost and Sullivan
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Smart cards in ecommerce
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Frost Sullivan - A Look at the Asian Pacific
Smart Card Market, 1999 and Beyond - by 2004,
Asia will command at least a quarter of the
revenue market shares worldwide, with China by
itself commanding nearly a third of market.
Frost Sullivan, - The Asian smart card market
will soar to new heights, especially in mainland
China where the technology is expected to
penetrate a slew of applications.
IDC, Industry Trends 02/12/00 - China "already
appears as the single most promising market for
the coming years".
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Smart cards in ecommerce
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The new card business
C One-to-One Past every smart card application
had to be lovingly hand crafted in assembler for
a specific chip and OS combination C
Many-to-Many future standard smart card apps
can be added or deleted, moved from one card to
another because the chips are running standard
multi-app OSs that any developer can write code
for.
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Smart cards in ecommerce
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New smart card Food Chain
C Chip manufacturer C Card fabricator C OS
provider C Application developers C Card Issuer
and designer and personaliser C Application
issuers C Application managers or service
providers C Card managers
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Smart cards in ecommerce
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Applications
Gemplus figures (Proton Report, Sept 2000)
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Smart cards in ecommerce
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Amex Blue
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XII World Productivity Congress 2001

• Heading for a Coinless Society with Octopus ?
• Rob Noble
• CEO Creative Star Ltd
• 7th November 2001

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Contents

• Octopus Progress Todate
• Future Projects Being Pursued
• Hong Kong Becoming Coinless?

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What Is The Octopus?

• A pre-paid stored value card utilizing
  contactless smart card technology
• Operates within wallet/purse for up to 10cm
• Less than 1/3 second transaction time

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Establishing the Octopus Card Base

• 6.8M inhabitants living in high density corridors
• Low car ownership (15)
• Nearly 11 million public transport rides per day
• Potential for one public transport card to reach
  all economically active people

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Formation of Creative Star

• In 1994 a joint venture company, Creative Star,
  was formed by the 5 major public transport
  operators
• Octopus card launched in September 1997

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Octopus Usage

• Currently 97 of total Octopus transactions on
  public transport
• Nearly 90 of railway passengers using Octopus
• Some 80 service providers accepting Octopus
• Now expanding further into private
  transport/non-transport

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Octopus Applications

• Public Transport and related
• 3 railways, 6000 buses, ferries, Peak Tram,
  Tramways, public light bus
• Car parks
• Parking meters

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Octopus in Off-Street Car Parks
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Octopus Applications

• Retail
• Fast food
• Cake shops
• Convenience stores

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Octopus Applications

• Unattended businesses
• Vending machines
• Payphones at MTR
• stations
• Photocopiers

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Octopus Applications

• Recreational facilities
• Public swimming pools
• Racecourses
• Non-payment service
• Access Control for
• residential estates
• School Attendance

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Add Value Service

• Add value service available at
• Ticket Offices/Customer Service Centres
• Add Value Machines
• Retail outlets which accept Octopus for payments
• Maxims fast food and cake shops

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Add Value Service (contd)

• Automatic Add Value Service with banks
• 250 added next use after 0 or negative value
• Save queuing time for adding value
• No worries about insufficient cash
• Available at nine banks so far

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Future Projects Being Pursued

• Extend use of Octopus as access control device
• Extend use of Octopus as identity card
• Extend use of Octopus cards in schools
• Introduce Octopus across the border in Shenzhen

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Future Projects Being Pursued (contd)

• Combined Octopus/hotel room key
• Combined Octopus/credit card with AAVS
• Octopus mobile phones and key fobs
• Home personal readers for web micro-payments

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Video Clips of Road Runner

• Railway
• Bus
• Retail

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Hong Kong Becoming Coinless?

• Virtually everyone in Hong Kong has an Octopus
• Already used extensively for public transport
• Being readily adopted for private transport/
  unattended environments

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Hong Kong Becoming Coinless? (contd)

• Soon a critical mass of manned payment SPs and
  cardholders thinking of retail payments
• CS pursuing many new Octopus projects

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Hong Kong Becoming Coinless? (contd)

• Big savings for operators if coinless
• Virtuous circle, more SPs and fewer coins
• Customers prefer Octopus to heavy, dirty,
  slower-transaction coins
• Large productivity gains if electronic
  transactions replace physical coins

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Hong Kong Becoming Coinless? (contd)

• Coins been around for some 2500 years
• Still some HK6b worth of coins circulating
• Real chance world-leading Octopus can help Hong
  Kong to become first coinless city

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Hong Kong Smart Cards

• Octopus
• 8 million cards, 9000 readers
• 7 million transactions/day
• Visacash
• ComPass Visa (VME)
• Mondex
• GSM SIM
• ePark

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Octopus

• Transaction time lt 300 milliseconds
• Transaction fees HK0.02 0.75
• 10 transaction costs 0.095 (0.95)
• Applications
• Transit
• Telephones
• Road tolls
• Point-of-sale
• Access control
• Anonymous / personalized
• How does money get to service providers?
• Net settlement system operated by Creative Star

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Entities of the E-payment System
Identification Card Issuer (Corporate or Service
Provider)
Purse Charger (Bank or third party)

• Access Control/E-payment terminal
• .Corporate secure Log in
• .Retail POS
• collecting Highway tax

Card Holder (User)
Corporate Information Center (Database)
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Octopus System
SOURCE WORLD BANK
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Smart Card Sales Leaders (2000)
VENDOR OF CARDS
SHARE Gemplus 185,000,000 29 Schlumberger 152
,000,000 24 Oberthur Smart Cards 85,000,000
14 Giesecke Devrient
76,000,000 12 Orga Card Systems 53,000,000
8 TOTAL 628,000,000
SOURCE CARDWEB.COM
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Mondex Security

• Active and dormant security software
• Security methods constantly changing
• ITSEC E6 level (military)
• VTP (Value Transfer Protocol)
• Globally unique card numbers
• Globally unique transaction numbers
• Challenge-response user identification
• Digital signatures
• MULTOS operating system
• firewalls on the chip

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Payment Cards
EMV EUROPAY INTL, MASTERCARD,VISA MPCOS
MULTI PAYMENT CHIP OPERATING SYSTEM

• 8-128 Kb
• Data rate 115 Kb/sec
• ISO 7816 compliant
• Visa-certified
• PIN management and verification
• 3DES algorithm for authentication, secure
  messaging
• Epurse with payment command set (debit,credit,
  balance, floor limit management)

SOURCE GEMPLUS
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Wireless Card Authorization
SOURCE SAMSUNG
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Mondex

• Smart-card-based, stored-value card (SVC)
• Subsidiary of MasterCard
• NatWest (National Westminister Bank, UK) et al.
• Secret chip-to-chip transfer protocol
• Value is not in strings alone must be on Mondex
  card
• Loaded through ATM
• ATM does not know transfer protocol connects
  with secure device at bank
• Spending at merchants having a Mondex value
  transfer terminal

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Mondex Components (Hitachi)
Electronic Cash Register
Cashless ATM
PCMCIA Reader/Writer
Key Fob Balance Reader
Electronic Wallet
SOURCE HITACHI
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• The National Bank of Kuwait (NBK) has launched
  the worlds first Visa internet-only payment
  card program in Kuwait city
• Features of NBK card include preset
  spending limits, automatic insurance from
  NBK for all purchases using the card
• .

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Smart Cards Will Play an Important Role In
Ecommerce

• Provide a secure storage for digital
  certificates and personal identification
• Convenience-Multifunction Card like the JAVA
  Card and very portable
• Log recent activities
• Can Provide automatic Logins to designated
  websites without having to remember passwords
  and login procedures
• Suitable for payment over the internet

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Conclusion

• Ecommerce will take off in Asia
• Smart Card will play an important role in
  ecommerce
• Security is an important issue and the smart
  card will add value to it
• Ecommerce will go wireless
• Asia has the highest growth rate of smart
  card usage in the world