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A landmark year sees the firm spread its easy-payment option across Hong Kong and sell its technology overseas

For Octopus Cards chief executive Eric Tai Yung-muk and his team, winning the DHL/SCMP Enterprise Award is a proud end to a landmark year.

The tentacles of the revolutionary payment delivery system have extended yet further into Hong Kong life this year, and the company has established its first overseas operation.

'We have won a number of awards, but this is the first we've won in terms of the business as a whole rather than some  individual parts of the business  we do,' Mr Tai says.

During a difficult year for many businesses, Octopus has pushed ahead, moving Hong Kong steadily towards the much-vaunted cashless society and a time when wallets, now bristling with plastic, will need to contain only three cards - the smart ID card, a credit card and an Octopus card.

'One of the major things we've done in the last 12 months is a very active push to get into the retail sector,' Mr Tai says.

'We've signed up both the major supermarket chains, which are delivering our payment mechanism now, and we've got a number of the significant car park operators going.

'We've done a lot of the cake shops and the like - basically micropayments for small items - and we've also got into the red minibuses. Our work was concentrated initially on the green minibuses, but this year we made a concerted effort to get into the smaller ones and the private coaches.

'Last, but not least, on the transportation side, we have  parking meters going now, and that is very convenient for customers. They don't  require a separate piece of plastic for that now.'

Octopus was established as a joint venture between the five major transport operators covering rail, bus and ferry services. The plan was to offer a single electronic ticket covering six modes of transport. The system was launched in 1997 and immediately gained widespread acceptance.

'In Hong Kong, there have been a number of catalysts for success,' Mr Tai says. 'One is that all the shareholders are major transport operators clubbed together with one ticket, and that has made it very convenient for  consumers to use. Imagine five transport operators running five systems of payment. That would be very confusing and also not very convenient. The fact that we started on the right foot made a lot of difference.'

But there were other factors unique to Hong Kong. Mr Tai said local consumers were well known to be technologically savvy, and, accordingly, took up the new technology quickly.

The crucial role public transport plays in Hong Kong life also helped to rapidly build up a substantial user base.  An average  11 million transactions a day take place between public transport operators and the travelling public.

'Because we started in transport, everybody uses us regularly, and in Hong Kong more people use public transport than drive, whereas in a lot of countries more people drive than use public transport. So we got a much more favourable start by comparison with a lot of other places,' Mr Tai says.

Once Octopus cards were in the wallets of the transport users, new uses were added, and this process  gained momentum in the past year.

'We have  about 5,000 vending machines in Hong Kong,  we will be trialling the taxis in the next few weeks, hopefully, and we've gone into attendance-taking for schools and school purchases,' he says. 'We also use our card for access control to residential properties and offices. In fact, the new Two IFC terminal is driven purely  by our system.'

Now the company - which is the only supplier-operator in the world of a payment system of this kind - is beginning to export its expertise and experience and has made its first sale to Europe.

Although its competitors include major international corporations such as IBM, Siemens and Hitachi, its experience of actually running the system is unique, which makes well-proven Octopus technology particularly attractive to buyers.

'We've been successful also this year in selling our system to Holland, which is an important milestone for us - taking Hong Kong technology and skills overseas to a very competitive market like Europe,' Mr Tai says.

'We've got a few more possibilities there - including one that we've sent in the pre-qualifications for - and there'll be a couple of others that we hope to at least pre-qualify for sometime in the next few months.'

Octopus also has signed the first contracts enabling it to establish a presence in China, and is reviewing the possibilities of issuing cards that will work in both Hong Kong and Guangdong province.

'China is very big, and obviously  the market is very tempting, but it's a very difficult market,' he says. 'It takes time and a lot of work to get deals done, so we'll take our time there. We're tackling things city by city or closed systems, working to supply a card system within a company.'

Although the Octopus card has become increasingly versatile, Mr Tai does not foresee a time when it will replace regular credit cards. The Hong Kong Monetary Authority limits the value that can be stored on it to $1,000, which limits the risk of users who have the misfortune to lose it. But he does see it increasingly becoming the preferred method of payment for smaller transactions.

'We're going to be very much concentrating on micropayments,' he says. 'Our business is the small notes and coins business. We don't see our average transaction being more than about $100.'

So, are we looking at a fast track towards a cashless Hong Kong? Mr Tai laughs: 'From our point of view, we wish it was faster.'



Octopus strengthens grip and extends reach