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| Subject: Octopus Card To Extend Into Retail Payment | |
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Author: Jan 30 2003-----Oct 16 2002Rob Noble, of ERG Group |
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Date Posted: 01:48:36 02/05/03 Wed Octopus Card To Extend Into Retail Payment European Card Review Jan 30 2003 : Octopus, Hong Kong’s contactless mass transit card, has “applied for a limited banking license” and aims “to put [its] chip on [the banks’] debit or credit cards some time this year”, says CEO, Eric Tai. The firm would have deployed its payment infrastructure in other sectors before now, but this move delayed by the need to re-engineer Sony’s Octopus cards, whose contactless aerial cracks when the card is embossed, according to the ECR. Octopus, which covers Hong Kong’s buses, ferries, metro and trains, is soon to extend into taxis with a view to increasing its profits. Retail transactions on Octopus cards average HKD 20 (€2.50), and “are 5 per cent of value at present”, Tai says, but the aim is “to move that up to 10 per cent” by end-2003. With “transit possibilities saturated in its local market, [Octopus] is looking to extend its activities into general retail payments and to offer its expertise globally”, the ECR reports. Tai, formerly a general manager at HSBC, and a board director of Mondex, also plans to promote Octopus to Visa, as a payments, access and ID program for the 2008 Olympics in Beijing, but will face stiff competition. To facilitate its global expansion, Octopus teamed with Acenture, Thales and Hong Kong’s MTRC transit firm (a part-owner of Octopus), to offer tenders in European cities like Oslo, Copenhagen and the Netherlands. The group is one of two candidates competing for a contract from the Dutch National Public Transport System, the other being Cubic, EDS and Siemens. However, Australian firm, ERG, owner of Proton World, which has some intellectual property in Octopus, anticipates “a significant debate” if Octopus sells its system “without synchronizing their plans” with ERG. Related Links: Oct 16 2002 : "The deployment of smart card technology in transit not only achieves a return on investment, but provides a platform for expansion into other small-value transaction markets", states Rob Noble, of ERG Group Asia Pacific. A smart card infrastructure primarily developed to support mass transit, also supports the rollout of multifunction products, as the example of Hong Kong's Octopus system shows. In 1997, five major transit operators in Hong Kong launched Octopus prepaid, stored-value cards to the public, and 8.5 million cards are now carried by 95 per cent of the population, with over 7 million transactions per day. Hong Kong effectively offers the world's first contactless smart card system, whose functionality extends into non-transit applications such as banking cards that contain the Octopus e-wallet, or a chip that can be embedded into a mobile phone or a keyfob, for seamless payments. While Hong Kong's car ownership rate is around 15 per cent, some 20 off-street car parks in the metropolis accept Octopus payments, with a contact card now being used for parking meter payments. Taxi drivers are also testing Octopus, whose use is rising at vending machines, payphones, ticket kiosks, and at Hong Kong's racecourse. Within the retail sector, Octopus suits high-volume, low-transaction value businesses such as quick-serve stores or cake shops. Since consumers prefer multifunction payment cards with credit, debit and e-wallet applications, Noble expects high smart card payment usage in the retail sector, but says "it will take time to change people's habits of paying cash for small transactions". Transit operators and commuters favor contactless cards for payment transparency, but Noble advocates the importance of dual-interface cards (supporting both contact- and contactless functions) for smart cards to realize their true potential. Jan 24 2003 : The contactless card market will grow by a CAGR of 47 per cent through 2007, Datamonitor reports, while radio-frequency cards will comprise 5.6 per cent of the USD 7.6 billion smart card market by 2006. In fact, “payment cards in major markets like the US and Japan may [leapfrog] to pay-and-go cards, skipping the conventional contact card”, according to Card Technology, as “contactless cards are comparable to contact cards in security”. RATP, the main transit operator in Paris, an issuer of contactless cards, is now seeking to partner with local banks to allow commuters to top up value on their cards on ATM networks. Microprocessors embedded in contactless cards provide the kind of security level required by banks, advises RATP’s Patrick Docquirer, who notes that “if banks have a microprocessor, RATP needs it”. To give context, “if you want to share a card with different applications and reload it remotely”, argues Docquier, “you need a higher level of security [as] it’s a race with fraudsters”. Transit operators stand to derive sizeable cost savings from contactless systems, which require annual maintenance costs of USD 75 per reader, versus USD 360 for a mag-stripe reader, Docquier asserts, as less data is captured in a payment. Contactless cards could [also] be poised for big growth in payment cards, as both Visa and MasterCard move aggressively early this year to offer their member banks contactless products”, Card Technology indicates. Visa, for one, sees fast-food restaurants as an optimal environment for contactless card use, according to Denny Jensen, of VisaSmart chip implementations. Visa cards with a contactless interface would similarly enable commuters to pay transit fares in cities where transit agencies accept contactless chip cards, the business case for which has been validated by Hong Kong’s Octopus multi-function card. JCB Uses Technology To Its Advantage Bank Systems Online Jan 16 2003 : JCB, the world's fourth-largest credit card brand, sees "technological innovation in payments [as] a potential advantage", according to Bank Systems News, while advocating a "consumer-oriented" strategy. "Our approach utilizes the potential for multi-functionality, for example adding payment functions to transportation-related uses", says Isao Nakanishi, CEO of JCB. Like AmEx, JCB "acts as a card issuer, acquirer and processor of credit card transactions" globally, and co-issues cards through about 70 partner banks and 50 non-bank licensees around the world. In Japan's Kansai region, JCB is planning a dual-interface smart card for EMV payments and contactless transit payment, and will process transactions for the venture. Japan East Railway is to issue similar dual-function cards with JCB and Visa, but, as BSN notes, "it doesn't [always] take the direct involvement of a financial institution to get a transit card program on track". Hong Kong's Octopus smart card, for one, moved into the transit, parking, entertainment and lifestyle sectors by extending to Nokia mobile phones, which act as contactless cards for fare payments. TowerGroup analyst, Ed Kountz, presents Octopus as a "holding company that has been able to view itself as more than just a transit processing authority" and one where "a payment nucleus can be extended to other areas". Bank Systems News also notes that "except for 16 banks that allow Octopus to debit their customers' accounts, financial institutions have been spectators to the Octopus phenomenon, ceding the revenue from card issuance, float and overdraft to the transit operators", and losing a refundable deposit of HK50 for each of the 12 million cards in use. [ Next Thread | Previous Thread | Next Message | Previous Message ] |