When Hong Kong's Mass Transit Railway (MTR) began operations in 1979, it used recirculating magnetic stripe cards as fare tickets.

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.

It was also extended to a limited number of non-transport applications, such as transactions and payments at photo booths and for fast food vouchers.

In 1994 it partnered with four other major transit companies in Hong Kong, Kowloon-Canton Railway Corporation, Kowloon Motor Bus, Citybus, and Hongkong and Yaumati Ferry, to create a joint-venture business, then known as Creative Star Limited.

The card is topped up using HKD and automatically converted into RMB when taking non-Hong-Kong public transport.

It was selected by the head of the MTR Corporation, the parent company of Octopus Cards Limited, in a naming competition in 1996.

The Octopus card was originally introduced for fare payment on the MTR;[25] but usage quickly expanded to other retail businesses in Hong Kong.

[29] Notable businesses that started accepting Octopus cards at an early stage included PARKnSHOP, Wellcome, Watsons, 7-Eleven, Starbucks, McDonald's, and Circle K.[30] Between June 2003 and November 2004, the Hong Kong Government replaced its 17,000 parking meters with an Octopus card–operated system.

The reader acknowledges payment by emitting a beep, and displaying the amount deducted and the remaining balance of the card.

[39] Other public transport operators also offer intermittent discounts for using Octopus cards on higher fares and round-trip transits on select routes.

In Macau, the Octopus card was introduced in December 2006 when two Kentucky Fried Chicken restaurants in the territory adopted its usage as payment.

[47] The two Kentucky Fried Chicken restaurants in Macau that adopted the Octopus card for payment are located at the Rua do Campo and the Sands Casino.

They are further classified into Child, Adult, Elder, and Personalised categories, with the first three based on age and different amounts of fare concession.

Smart Octopus provides features like instant transaction notification and in-app top-up function.

[59] As Octopus cards use FeliCa technology, only Apple Watch 3, iPhone 8, and subsequent model are supported.

[65] The Australia-based company ERG Group (now Vix Technology) was selected in 1994 to lead development of the Octopus project.

[66] Operations, maintenance and development were undertaken by Octopus Cards Limited, and in 2005, it replaced the central transaction clearing house with its own system.

[3] The Octopus card is the first major public transport system to use the Sony 13.56 MHz FeliCa radio frequency identification (RFID) chip.

Data is transmitted at up to 212 kbit/s (the maximum speed for Sony FeliCa chips), compared to 9.6 kbit/s for other smart card systems like Mondex and Visa Cash.

[51] Octopus is designed so that transactions are relayed for clearing on a store and forward basis, without any requirement for reader units to have realtime round-trip communications with a central database or computer.

[70] The stored data may be transmitted after hours, or in the case of offline mobile readers, may be retrieved by a hand held device, for example a Pocket PC.

[72] In other words, data communications are only established when the card and reader have mutually authenticated based on a shared secret access key.

On 11 February 2009, Sing Tao Daily reported that the fail-safe has been abused for fare evasion through the railway station turnstile.

Being a payment business, Octopus Cards Limited is regulated by the Hong Kong Monetary Authority.

[81] In February 2007 it was found that when customers added value to their cards at self-service add-value points in MTR and Light rail stations, their bank accounts were debited even if the transactions had been cancelled.

[83] On 27 July 2007 it was announced that faulty transactions had been traced back to 2000, and that a total of 3.7 million Hong Kong dollars had been wrongly deducted in 15,270 cases.

[86] On 20 July, Octopus acknowledged selling customers' personal details to CIGNA and Card Protection Plan Limited, and started an internal review of their data practices.

[88] Roderick Woo Bun, Hong Kong's Privacy Commissioner for Personal Data, gave radio interviews and called for transparent investigation, but his term expired at the end of July 2010.

This news was met with protests and international outrage, due to his prior history of privacy invasions involving cameras used to spy on employees at the Post Office, and disclosing hundreds of job applicants' personal data to corporations.

[90] As NFC and cardless payment are more popular in mainland China, some question the slow technology development of Octopus company.