History
The Mass Transit Railway (MTR), one of Hong Kong's railways, adopted a system to recirculate magnetic plastic cards as fare tickets when it started operations in 1979. Another of the territory's railway networks, the Kowloon-Canton Railway (KCR), adopted the same magnetic cards in 1984, and the stored value version was renamed Common Stored Value Ticket. In 1989, the Common Stored Value Ticket system was extended to Kowloon Motor Bus (KMB) buses providing a feeder service to MTR and KCR stations and to Citybus, and was also extended to a limited number of non-transport applications, such as payments at photobooths and for fast food vouchers.
The MTR Corporation eventually decided to adopt more advanced technologies, and in 1993 announced that it would move towards using contactless smartcards. To gain wider acceptance, it partnered with four other major transit companies in Hong Kong to create a joint-venture business to operate the Octopus system in 1994, then known as Creative Star Limited. The Octopus system was launched after three years of trials on 1 September 1997. Three million cards were issued within the first three months of the system's launch. The main reason for the quick success of the system was that the MTR and KCR required that all holders of Common Stored Value Tickets replace their tickets with Octopus cards in three months or have their tickets made obsolete, thus forcing their combined base commuters to switch quickly. Another reason is the coin shortage in Hong Kong in 1997; there was a belief that the older Queen's Head coins in Hong Kong would appreciate in value, so many people hoarded the older coins and waited for their value to increase. The Octopus system was quickly adopted by other Creative Star joint venture partners, and KMB reported that by 2000, most bus journeys were completed using an Octopus card, with few coins used. Boarding a bus in Hong Kong without using the Octopus card requires giving exact change; this is cumbersome compared to using the Octopus card. By November 1998, 4.6 million cards were issued, and this rose to 9 million by January 2002.
In 2000, the Hong Kong Monetary Authority granted a deposit-taking company license to the operator, removing previous restrictions that prohibited Octopus from generating more than 15 percent of its turnover from non-transit related functions, thus allowing the Octopus card to be widely adopted for non-transit-related sales transactions. On 29 June 2003, the Octopus card found another application when the Hong Kong Government started to replace all its 18,000 parking meters with a new Octopus card operated system. The replacement was completed on 21 November 2004.
Read more about this topic: Octopus Card
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