Successful Smart Card Footprints

Hong Kong is undoubtedly among the key adopters of smart card, autoid and security technology in Asia Pacific. In the smart cards arena, key applications in this country include government ID, mass transit, SIM and banking.

Hong Kong has one of the highest mobile penetration rate in the region, with over 100% subscriber penetration rate in a competitive mobile communication market. 3G services were introduced in the country in 2004. The profile of mobile subscribers in the country is considered to be fairly sophisticated when compared to the rest of the region. However, due to the size of the country, Hong Kong's SIM market is still considered relatively small, although it is well established.

One of the highest profile applications in Asia Pacific is Hong Kong's contactless smart card mass transit project, the Octopus Card, used for fare collection on various mode of public transport in the country. This project was launched in 1997; one of the earliest in the world. As a result the card is widely used in the country today, with a circulation rate of approximately16 million in 2008 and over 50 000 readers at mass transit points and merchant outlets. The card is also used for payment at selected merchant outlets, making it both a travel card and a contactless e-purse card.

Another significant implementation in Hong Kong is the government ID application, SMARTICS (Smart Identity Card System). This is a citizen card that began issuance in 2003 and was completed within a few years. The card is used for identification, government services and e-banking. SMARTICS is known to be well executed and implemented in the region, lending it several regional and international awards in the government ID field. Based on the same MULTOS platform used for the citizen card, the country also implemented and issued their e-passport documents, another government issued document using smart card technology, to their citizens beginning 2007.

Following the footsteps of other countries in the region like Taiwan and Malaysia, Hong Kong has also begun migrating their bank cards from magnetic stripe to chip based bank cards. This migration, better known as the EMV migration, began in 2006 and is intended to reduce fraud through utilizing more secure and tamper-proof bank cards.

The above mentioned projects illustrate Hong Kong's wide adoption of both contact and contactless technology for over a decade. The country is expected to continue experiencing demand for smart cards in all key applications through new projects, upgrades and replacement cards in the various sectors.

Hong Kong Contactless Smart Cards: Physical Access Control Market, 2008

Security is Country's Priority

RFID

• Hong Kong can be considered as one of the key promising followers for RFID Technology in Asia Pacific. The country has strong support from its government especially in supply chain management, similar to China. The approved UHF bands in Hong Kong are 865-868 MHz (2W erp) and 920-925 MHz (4W erp).
• Hong Kong RFID development is strongly supported by the government. It is one of the top research areas for the Hong Kong Research and Development (R&D) Centre for Logistics and Supply Chain Management Enabling Technologies. It receives funding support from the Innovation and Technology Commission of the Hong Kong Government.
• SCM R&D Centre works together with three leading universities in Hong Kong: The University of Hong Kong, Chinese University and Hong Kong University of Science and Technology.
• The Government's Innovation and Technology Fund has provided financial support for many RFID-related projects amounting to US$13.84 million (HK$108 million). The Hong Kong Special Administrative Region Government also provides financial support through the Innovation and Technology Fund.
• These funds are given not only to encourage more involvement in RFID technology but also to improve RFID tagging and embedding technology, application of RFID technology in food safety, enhancement of privacy protection and communication security, and development of a real-time manufacturing shop-floor information infrastructure.
• The 'Guangdong-Hong Kong Technology Co-operation Funding Scheme' is a joint fund between the Hong Kong and Shenzhen governments, which includes funding for RFID projects.

Some of the key applications creating demand in the market are baggage handling, food security, fleet management, transportation, and supply chain amongst others.

Some major events are also helping to increase visibility for Hong Kong's growing market.

• The Hong Kong RFID Centre, co-hosted by the Innovation and Technology Commission of the Hong Kong SAR Government, Hong Kong Science and Technology Parks Corporation (HKSTP) and GS1 Hong Kong (GS1), was established to promote the development of RFID in Hong Kong, encourage application among industries and enhance public awareness of this technology and its significance for the economic and social development of Hong Kong.
• The Hong Kong RFID Awards were established since 2007 to recognize RFID industry pioneers, encourage RFID development and to nurture the development of new RFID products in Hong Kong.

Security

The Hong Kong Security Market is mature and has always been an early adopter of the latest technologies in security applications. The total Electronic Access Control Systems (EACS) and surveillance market has been showing positive growth year on year, especially contactless smart cards and biometrics. End users in Hong Kong are concerned about new technology trends in EACS and hence prefer integration with other systems such as time attendance.

• Access control finds major application in prominent Government departments like the Customs & Excise Department, the Police Force, the Airport Authority, the Fire Services Department, and the main transportation controllers Kowloon Canton Railway and Mass Transit Railway.
• There is high demand for various types of property protection equipment, including physical access control, in Hong Kong. The increase in awareness following the 9/11 terrorist attack in 2001 and the SARS outbreak in 2003 has fueled demand for security, especially for the Hong Kong International Airport.
• The travel industry is keenly looking at biometrics and has already installed facial biometrics scanners at select railway stations. Facial biometrics has been employed at stations where the train travels to and from China. Facial biometrics scanners scan the individuals face during departure and match the same when the individual returns from his/her destination. The facial biometrics employed here is not for access control but is being used as a security measure to identify terrorists or other marked individuals.
• Certain mobile phones are also employing biometrics today for logical access control applications.

It is quite evident that biometrics is being tested and employed in every sector of society and has found to be useful, especially for largely populated cities like Hong Kong. Hong Kong is following new technologies in using access control systems. A majority of users prefer readers that support multi-application functions, offer high security, and are reasonably priced. Integration of technology is increasingly becoming popular in Hong Kong because of their ease of use and installation.

The market for IP surveillance is mature in Hong Kong in terms of technology penetration and infrastructure although Traditional analog equipment suppliers are still reluctant to commit the R&D investment to push the video server line. Certain suppliers that have ventured into IP video surveillance market have chosen to focus on IP/network cameras instead.

Outlook in Hong Kong

No country has been immune to the global financial crisis; Hong Kong and every industry out there has been affected by this crisis, with varying degrees of severity. As the financial markets do not show immediate signs of recovery at least until the third or fourth quarters of 2009, with strong possibilities to spillover into 2010, the short-term future for the industry looks challenging.

The failing economy could, however, provide a boon for companies that are involved in security. As economic pressures filter down to the middle and lower income classes, crime will increase. In the light of this, large growth can be expected in electronic access control systems and video surveillance to monitor customer and employee behaviors in retail outlets, shopping malls, hotels, parking lots, and so on. It is also expected that the companies will benefit from any government investment that will help compensate for the decline in the economy.

In addition, during these hard times where companies are reducing their workforce, physical security becomes increasingly important to overcome issues regarding both external and internal workplace theft.

Falling prices of security products are likely to increase adoption during this slump in the economy. Although companies might not realize the ROI with the fall in prices, these lower prices might help them to remain in business; falling prices will make the security systems and their applications much more economical to install.

The current economic recession indicates that participants that were looking at a short-term gain were the worst affected, while those looking at long-terms gains still have their investments in place. However, this does not mean that the long-term participants are not affected by the recession. They need not be as concerned about the current recession, but will still have to reinforce their projects to make sure that they do not go off track.

The same applies to the smart card industry. On the whole, the smarty card industry participants should concentrate on their core competencies for their respective applications through utilizing all the benefits from government subsidies, tax cuts, and so on. The next stage should be in investing, or at least laying the foundation, for the next year from when an economic upswing is likely to be witnessed. New applications should be tapped now. Strategic alliances should also not be ruled out. A strategic alliance would help the industry participant to expand to new markets, as well as allow it to concentrate on its core competency.

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