Enabling Technologies

Probably the Best Payments System in the World has Little or No Mobile to it

MEDICIFounder and Chief Strategy & Innovation Officer

I am in Hong Kong this week. One thing that will strike you immediately here is the Octopus payments system. Actually people will just talk about the Octopus card and not the mobile or wearable part of it because that's what everybody uses. Its available widely, you can top it up anywhere, and use it at every merchant (from big box retailers, subway, buses, to mom and pop shops and even remote tourist places). It has a mobile option as well (sim card) but it's not used much because of lack of handset and platform support beyond a bunch of approved handsets. So I have been thinking - are mobile wallets really required? The Octopus card is the anywhere commerce system, the utopian system we talk about, isn't it? It enables rewards, loyalty, works at transit as well as retail and public services and seamlessly integrates payments in commerce.

The Octopus Card was introduced in Hong Kong back in 1997. The contactless smart card was initially conceived to allow commuters to pay at public transport systems, but since its inception, the card’s usage has expanded widely. The card can now be used at over 13,000 retail outlets and 6,000 service providers, right from eateries, convenience stores, and supermarkets to vending machines, kiosks, parking machines, etc.

I myself paid at Starbucks using my card that I had topped up at 7 eleven. Check out the illustration below. See the orange and white octopus reader, the multi color octopus card that I used, and the receipt below with the same number as the card. I used the card several times throughout the whole day at subway trains and in the supermarket opposite my hotel.

octopus card

Octopus card's transaction records give clear a indication of its immense popularity. Over 13 million transactions occur each day using Octopus cards, with the transaction value crossing $18 million. Over 24 million Octopus cards are already in circulation. More than 67,000 Octopus readers exist in the market, with 40% of the total usage of Octopus cards coming from the retail side. Octopus cards are available in formats which have been customized specific to different age groups.

octopus card2

In October 2013, Octopus Cards Ltd launched an Octopus mobile SIM in conjunction with Sony and PCCW. These SIM cards are meant for NFC enabled smartphones, which enables such phones to act as Octopus cards and also settle payments for online purchases. In February 2014, Octopus launched a new service enabling cardholders to pay for goods on Alibaba’s e-commerce website “Taobao” by using an Android app registered with the Octopus card. Over $1.3 million worth of Taobao transactions were made in the first month itself.

Back in August 2012, Octopus had launched the “OctoCheck” app in order to  allow smartphone users to keep track of their Octopus transaction records. The app was only available for Android based NFC enabled smartphones. The app was later upgraded to the official “Octopus” app, offering the following features:

  • Check Octopus' remaining value, the latest transaction records, and other information
  • Make Octopus Online Payment at designated online merchants
  • Conduct Incomplete transaction refund enquiry and collection
  • Activate AAVS (Automatic Add Value Service)

The app has witnessed over 600,000 downloads. Over 1.4 million customers currently enjoy the hassle-free Automatic Add Value Service provided by over 20 financial institutions. In addition, there are over 3.1 million registered Octopus accounts under the widely adopted Octopus Rewards program, allowing members to earn Reward$ regardless of their payment means, and redeem them as cash across about 20 participating merchants.

According to David Parker, CEO and Founder, Polymath Consulting/Commercial Director Sporting Sites Worldwide: "One of the success factors is the interchange rate on Octopus for merchants is sub 1%, yes below 1%. This is well before the new EU rates and Durbin act. This meant in effect they bought merchant acceptance by providing a far cheaper card acceptance solution."

I have also seen a person who used his watch in the subway station to pay for the ticket. Octopus also offers some licensed products in the form of accessories and smartwatches. They may be reloaded with money value the same way as the card itself, including automatic reloading via the Automatic Add Value Service. An Octopus watch may be stored with a maximum of $129. The watches come in two different categories, namely “Genetics” and “Citykeys”.

I used the card several times in a day (even as a visitor) and every time I tapped it I thought this is definitely one of the best payments system in the world. But Octopus has to figure out the mobile component. Thats the future. Given that everybody from bus drivers, shop attendants, middle class to rich have iPhone 6 and 6 plus in HK, the system needs to address the iOS platform as well.

octopus card3

Amit Goel

MEDICIFounder and Chief Strategy & Innovation Officer

Amit Goel is the Founder & Chief Strategy & Innovation Officer for MEDICI. Amit’s vision is to build a strong FinTech market network that involves financial institutions, banks, startups, investors, analysts & other key stakeholders across the ecosystem – helping each one of them in a meaningful way by removing the asymmetry of information and providing a platform to engage & transact.

Amit is passionate about bringing actionable FinTech-focused insights, innovative products & services for the FinTech ecosystem. Some of his work involves startup scores, bank scores/assessments, predictive viewpoints & other innovations that have helped MEDICI’s customers and the ecosystem. He has been named amongst the Top 100 FinTech thought leaders/influencers in the world & Top 10 in Asia multiple times by reputed agencies, consulting firms as well as financial institutions. Amit has built MEDICI (formerly LTP) as a new-age, tech-enabled advisory/research firm, which is now considered the #1 global research & innovation platform for FinTech in the world.

Amit has been writing pioneering viewpoints on financial technology space that have been ahead of the curve since 2010. His data-driven predictions have helped the customers as well as the ecosystem. His past work experience includes a strong background in strategy & market analysis and advisory to clients (from big business houses to Fortune 500 firms) in payments, commerce, financial services & IT/technology. In the past, Amit had also founded a successful consulting & research practice called GrowthPraxis and has worked at Boston Analytics, Frost & Sullivan, and Daimler Chrysler in strategy & research.