Do smart cards benefit HK society?

AS and A Level Business Studies

Jeffrey Chow

13GY

Extended Essay on ITGS

Do smart cards benefit HK society?

This topic was chosen because it involves a lot of peoples’ daily lives. It is also part of one of the leading industries in the economy which changes very often and changes the way of our living. Smart cards have tiny computer chips as they can process jobs like a computer with the tiny microprocessor. They are new technology products similar to credit cards but have a greater range of usage. Data are stored inside the smart card. When smart cards are inserted into a reader, the data stored in the microprocessor of the smart card is sent to the operating system and data are transferred to and from the operating system to perform jobs. Why were smart cards invented? It is believed that computer technology participates a very important role and they are replacing various things in our daily live things. Smart cards have come up to our lives as a technology investment and benefit us from carrying less hard cash with us which reduce Hong Kong crime as a whole, there will be less theft. In Hong Kong’s society, smart cards almost involve in most peoples’ lives, they can be used to buy goods from supermarkets and to pay transportation fees such as the Mass Transit Railway in Hong Kong, lunches from some restaurants and they can also be recharged in a lot of places such as 7-11 convenience stores. Mass Transit Railway is an underground railway in Hong Kong which is similar to the Underground in Britain. Hong Kong is also moving onto a new invention, HKID smart cards. This is personal identification cards of Hong Kong citizens which will contain their personal information including thumbprints. The other type of commonly used smart cards in Hong Kong and the world is SIM cards, Subscriber Identity Module. They are cards that you put in your cell phone to receive signals from your service providers which will give you access to phone calls. Do these smart cards benefit Hong Kong society? Mondex as a smart card that was in Hong Kong has failed but Octopus clearly has a success and the new HKID cards with advanced security claim will help the Hong Kong society into a more secure country.

Advantages of Smart cards

The security of smart cards is better than magnetic tape credit cards as they “On the Internet, smartcards increase the security of the building blocks Authentication, Authorization, Privacy, Integrity, and Non-Repudiation. Primarily, this is because the private signing key never leaves the smartcard so it’s very difficult to gain knowledge of the private key through a compromise of the host computer system.”(Secure service provider). Smart cards have better security than the credit cards which use a magnetic tape at the back of the card to read data. It is also possible of doing the jobs of a credit card, withdrawing money from the bank just like a credit card. It can do the same jobs as the credit cards in a faster way as well. As we know from experience, when we use our credit cards to buy goods from a shop, you will have to wait for the computer system to check your credit card credit limit with the bank acount. If you are authorized to use the card and then you have to sign on the receipts to make sure you are the cardholder. But with Octopus from Hong Kong or any other smart cards, it directly take credit from your Octopus, therefore you do not have to wait for the computer system to check your authorization, it transfers the data immediately back and forth to your smart card. Smart cards speed up our daily life, “improving the delivery of services and reducing the cost of administration.”(totse.com)

Smart cards are “secure, reliable and compact device” (totse.com) As the smart cards work with their own microprocessor data transferred back and forth into the microprocessor and this means data can be changed and the value inside the smart card can be changed. This is one of the greatest advantages of the smart cards because they are unlike telephone cards, which has their own set amount of value. Once they are used up, they can not be revalued and has to be thrown away, this is environmentally harmful which means smart cards are good to Hong Kong and the world if they are relying more on smart cards. Another advantage of smart cards is that magnets can not destroy them. Unlike credit cards, when the magnetic tape gets around magnets, they can get destroyed and all the data will be lost. This will be time consuming for the user to renew the card because the bank has to send him the new card and new password, while the banks have to do this with machines because no one from the bank is allowed to know the password. Smart cards are not only used like Mondex and Octopus to do payments. In Germany, there are also smart cards which are health care cards, they store patients’ personal health record.

Mondex

The first smart card in Hong Kong is actually not the Hong Kong well known Octopus, in fact it is Mondex, which is known world wide. It is a smart card that is very similar to the Octopus. It stores how much values you have in your card, and when you pay with it, it automatically reduces the credits inside. “Mondex card carries a record of its last ten transactions, including the date, the name of the merchant or vendor and the amount of the purchase.”(Master Card) Their card balances can be checked through a “Mondex key ring card ...

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Mondex

The first smart card in Hong Kong is actually not the Hong Kong well known Octopus, in fact it is Mondex, which is known world wide. It is a smart card that is very similar to the Octopus. It stores how much values you have in your card, and when you pay with it, it automatically reduces the credits inside. “Mondex card carries a record of its last ten transactions, including the date, the name of the merchant or vendor and the amount of the purchase.”(Master Card) Their card balances can be checked through a “Mondex key ring card reader” that comes with the card. One of the smartest things of a Mondex card is that it is also a multi currency card. “capable of holding up to five different currencies separately.”(Smart Cards, The Global Information Passport, p153)

The main problem it had faced in Hong Kong was the lack of support. According to Sumner Lemon’s written article, it was said that “efforts to sign up other retailers appear to have fizzled.”(Computer world) In an article from the South China morning post, it was said that Mondex are not better than the credit cards due to the security reasons. “Or smart cards are, at least for the moment, no more than stupid credit cards.” “I’m sticking to cold, hard cash.” “I’m certainly not adverse to using the Internet for credit card purchases.”(SCMP article) This means back then when Mondex first came out in Hong Kong, people still think it is not very convenience as you lose the card meaning losing everything inside.

Mondex came out in the 1997. It didn’t meet original expectations. This was also because in the 1996 similar programs came out and did not meet what the producers expected. “Visa Cash by Visa at the 1996 Summer Olympics in Atlanta, Georgia, has reportedly fallen flat there with the withdrawal of most participating banks. Mondex has reportedly shut down tests in Swindon, England, and Guelph, Ontario.” (Computer World)

There was also personalized Mondex. The Chinese University of Hong Kong wanted to personalize these Mondex cards, it was called the CU Link, allowing their staff and students using the CU link Mondex to do the following things. “using one card to access campus facilities as well as banking and payment services offered by Hang Seng Bank both on and off campus. The CU Link is an all-in-one card for identification and access control” (CU Link) “The CUHK will input the cardholder’s data into the microchip, enabling the card to function as an identity card and bringing increased convenience to cardholders” (CU Link)

Other than this, Mondex is also very flexible in adding values and payments. Payments are quick and easy and values can be added to your Mondex from your bank accounts to the card at public telephones which has the Mondex sign or cash machines or bank counters. Unlike Octopus, later introduced, Mondex allows purchasing more expensive products as long as there are enough values inside, while Octopus’ has a maximum value of $1000. There is also a special security system on Mondex, where you can lock any transactions with the four digit lock password. By turning on the lock key, any transactions or device checking the remaining value is locked until the lock password is correctly inserted.

Hong Kong Octopus

One of the most well known smart cards in Hong Kong is called Octopus. It overtook Mondex in Hong Kong, it is a very similar card compare to Mondex. “Octopus is an electronic payment system using contactless smart card. It offers users an easy and hassle-free way to travel, shop and dine around Hong Kong. Each Octopus card has a built-in microchip which stores money electronically and also has other applications. Users simply wave their Octopus cards over an Octopus reader which will automatically deduct the correct amount from the card”.(Octopus) It is demanding more popularity over the past years. Many businesses have also begun to use the Octopus readers to allow their customers to pay for the service. This helps both the firm and the customers to save time from taking in hard cash and changing money back to the customers.

There are also a lot of people that is afraid to lose the card among with the card’s deposit. They believe the amount of deposit is too expensive and their ideal price of deposit is $21-30(Lang209, 4.5) compare to the $50 original price. According to the author of Lang209, a reason of setting the high deposit by the company was “to recover the money that passengers did not pay back the negative amount inside the Octopus Card”(Lang209, 4.5)

Advantages of Octopus

Octopus also benefits Hong Kong society with people paying with Octopus and not hard cash. For example, when people from Hong Kong take the bus and when they do have enough change to pay the exact fare, then the person will have to pay a little more than the exact fare. But by using the Octopus, the machine takes out exactly the amount as asked, therefore for the people that uses it, it will benefit for them from saving the unnecessary amount that they would have to pay if they do not have enough change and saving time from finding enough change. Some people also believes Octopus is good because “they could use the very last $0.1 in the ticket to take the most expensive journey”(Lang209, introduction) While the security of smart cards are also better than credit cards also in a way because credit cards can be hacked easily online to get their information to consume things, “A 2-year-old security hole in Microsoft Corporation's Internet Information Server (IIS) software let a computer cracker download thousands of credit-card numbers from e-commerce sites recently and post them on the Internet.”(CNN) Another way that it is more save is that, it can not be read from illegal credit card readers and therefore, smart cards cannot be copied for illegal use. One other advantage of Octopus is the limitation of how much money you can put in it. Their limit is $1000, so that is also the limit of how much you can lose when you lose your card.

Surveys that have been done by Lang209 has shown that reasons that people uses Octopus are “More convenient than old charging method, Store-valued ticket cannot be used in near future, Lower traveling cost for Octopus System, Persuaded by others, Can access several transport systems with the same card and the card design was attractive”(Lang209, table1 Reasons of people using the octopus system).

There are also personalized Octopus cards. For students, they can be enrolled into a Student Travel Scheme if they want to take the MTR with a discount. This is a personalized Octopus Card with the student’s name and picture at the back, the subscriber is asked to fill in a form which includes their Chinese name, English name, sex, HKID number, mailing address, school name, school address, contact telephone number, age and the school endorsement. This information will not be stored into the octopus card and is only use for MTR’s own database system to keep track. (Octopus Phone)

There is also another type of a personalized Octopus card, it allows the user to automatically add value to the octopus card they are holding when there is a negative value in it and this is done by registering the smart card with their banking account. “Each Personalized Octopus card can be automatically reloaded with $250 once a day.. “ (Octopus) This means for Octopus users that have enrolled into the automatically add value system, their maximum loss of the card is $1250. One other advantage for personalized smart cards holders is, “There is an added security for using Personalized Octopus cards - cardholders can report the loss and the lost card will be blocked from further use within 24 hours. Cardholder is only required to bear the loss arising during the first 24 hours after the loss report*.” (Octopus)

Disadvantages of Octopus

Although Octopus are faster than credit cards in payments, they do not have identification to the users on them, the personalized Octopus only stores the information that requires to keep operating. This means when people use this smart card, once its lost, it means that you have lost all the money that you have inside and you cannot get it back because even if you report to police office, there would be no way that the police can find it for you when they cannot check where the card’s location is without your identification. A survey done by the author of Lang209 has also reported that people that have used the card before, mostly believes that the problem of the card could be “problems in sensing the octopus card” (Lang209, 4.6)

A problem with the smart cards Octopus in Hong Kong could be, when you are holding your card, there is no display on the card of the remaining value until you use it. The value can only be checked in certain places using the special machine, and most places you have to use the Octopus to consume something to get the remaining value, which is a very bad design. There are places such as the MTR stations allows the users to check it but other than MTR stations, there are hardly anywhere you can do this.

“Although the cost of smart cards is higher than magnetic stripe cards, it is falling rapidly. At the same time the processing capability of smart cards is increasing. The building blocks for a smart card infrastructure are already available.” (totse.com). This quote proves that smart cards cost are high. Octopus in Hong Kong’s value proves this as well, the company that produces it charges the users a fifty Hong Kong dollar deposit to make sure they do not make a loss in this production and because of its cost, the price is relatively high compare to magnetic stripe cards, even though it is quoted that the price is falling rapidly but this would require time.

SIM phone cards

Subscriber Identity Module known as SIM cards, are also smart cards. There is an increasing use of mobile phones in Hong Kong, we can see teenagers at age of 12 carrying one on the street. The mobile phones also uses smart cards to operate, they use the smart cards from the service provider to produce the signals on the phone. A cellular phone can range signals up to 24km. All the data are sent back and forth from the service provider to the SIM card. The SIM card contains all the information that the provider needs to keep your phone operating such as your phone number. The SIM card also has storage spaces inside, they allow you to store messages inside and allows you to keep contacts in a phone book inside.

SIM card are also flexible with their security, because you are allowed to put password protection on the SIM card and once active, you are asked to enter it in certain occasions, this means unauthorized users are unable to use the phone unless they have the password, this protects the users’ information from getting stolen by unauthorized users. Once the password is wrong for three times, the SIM card will be unusable which means even you have the correct password after the three times entry, you will not be able to have access to the SIM card, this way the unauthorized user will not have a chance to try all the different possible passwords that can be entered into the phone. Once your phone is lost, you can call the service provider and they can help you to stop the connections with the SIM card, therefore you would not be paying for illegal use of your original SIM card, such as long distance calls that the thief may make.

HKID cards

Hong Kong is also beginning to change all the Hong Kong ID cardholders card into smart card as well, therefore it will be much harder for people to make fake HKIDs illegally. The new smart card HKID contains the following information which could only be read with a special reader which only allows access if the correct thumbprint is read. “Personal information and photograph, similar to those printed on the surface of the existing identity cards; Templates of both thumbprints, stored as a set of figures which cannot be used to reconstruct the thumbprints; Condition of stay and limit of stay for non-permanent residents; and Minimum but essential data (if any) pertaining to other non-immigration, value-added applications.” “The use of thumbprint identification technology will provide added assurance that only you alone can use your identity card.” (HKID 1) This would be better than the original HKID we are holding because it contains more information and these are also essential information about ourselves that we can get access to through special machines.

The Hong Kong government claims that the new HKID coming up will have the following advantages: “High security - data engraved in the card surface and held in the chip can prevent lost or stolen identity cards from being altered or used by other people. Greater convenience - card holders can benefit from the convenience of using one card for various functions. Faster travel - facilitates the future introduction of the Automated Passenger Clearance System which will help reduce the queuing time. Quality service - provides the potential to acquire on-line Government services conveniently over the Internet or at self-service kiosks without the need to attend Government offices in person.”(HKID 1). But when it comes to policemen checking people’s HKID on the street, does this mean that the policemen will have access to the person being checked’s personal information? Wouldn’t this be interfering the person’s personal private information? All these benefits all the Hong Kong people because they reduce the crime of using fake HKID.

Even there are some disadvantages to these smart cards, but it helps Hong Kong’s whole general economy runs faster.(Lang209) Octopus is fast and easy as known, it saves time of consumers and shops. Consumers now can carry much less cash with them. Smart cards are beginning to be a way that Hong Kong is seeking to reduce crime, such as Octopus and the new HKIDs. But are these octopus cards and SIM cards made as intended? We cannot study this question on the HKID cards yet because are not distributed to all Hong Kong citizens yet, as it is only distributing by age groups which would have effect to a survey, if one was done. But it is definitely made as intended for Octopus and SIM cards, as it has high security system. These smart cards has been doing the best jobs maintain crime and the running of the Hong Kong society. They also benefited a lot for Hong Kong residents, because the way the smart cards operate are very convenient and they help to speed up Hong Kong people’s lives, as Hong Kong people always say, “Time is money”. As Hong Kong is beginning to rely more on smart cards, this means that they have taken over parts of our daily life. They are also being used legally, therefore it has been encouraged to continue.