The Octopus smartcard, manufactured by Sony, has a built-in IC chip and communicates with different fare processors through the use of a Sony card reader/writer. 
The reader/writer is a device comprising of a controller board and an antenna. It uses inductive Radio Frequency (RF) coupling to transmit power and data signals to the processors inside the Octopus Contactless Smartcard. The operating range of the reader/writer is between 30mm - 100mm depending on the type of model being used. Data communications to and from the card is only established when mutually authenticated security handshaking is verified after which encrypted data is transferred. 

A reader/writer is connected to each Octopus fare processor, and receives commands from the fare processor controller on the actions to be performed. The transaction data is then either stored in the reader or sent back to a host computer, depending on whether the fare processor is an on-line or off-line device. In any event, all transaction data are sent back to Central Computer of Octopus by the end of each day for clearing and settlement purposes. 


The Central Clearing House System of Octopus uses a complex set of business rules to validate each transaction prior to authorising settlement amounts. A standard set of reports is then sent to each participating Service Provider on a daily basis. 
For further detailed information on the smartcard and reader / writer being used, please refer to the Sony website at the following address: http://www.sony.co.jp/en/Products/felica/contents02b.html