Radio frequency identification (RFID) is a technology that uses communication through the use of radio waves to exchange data between a reader and an electronic tag attached to an object, for the purpose of identification and tracking.

The current application of the technology in the retail sector has been shown to benefit businesses by improving efficiency and facilitating focused marketing campaigns. Developers of the technology are now working on improving their processes in order to reduce the costs of tags and reading equipment. Once this has been achieved, we are likely to see more businesses utilising radio frequency identification as part of their stock control and marketing processes.

This technology has the potential to offer significant cost and time efficiencies, as well as a valuable insight into consumer spending habits for the businesses that choose to utilise it.

Some of the advantages of radio frequency identification tags over bar codes include the ability of readers to receive information from tags without having ‘sight’ of them, and the fact that several tags can be read simultaneously. In addition, more expensive tags designed for high end products can have both read and write capabilities, and data stored on the tags can be changed, updated and locked.

Businesses that have already begun using radio frequency identification tags have found that the technology offers a better way to track merchandise for stocking and marketing purposes. Through these tags, businesses can see how quickly products leave the shelves and who is buying them. This means that they will be able to use customer specific marketing to tailor their weekly special offers to a particular customer, and thereby increase the likelihood that that customer will return to their store.

Once manufacturers are able to lower the cost of tags to businesses, there is likely to be an exponential increase in the use of this technology in many different sectors. Indeed, Apple Inc. are currently conducting tests with a view to incorporating a radio frequency identification tag in its iPhone 5 model. The objective is that the tag will enable the customer to use the phone as a wireless payment device, which can be used to pay for goods from any business which has installed a radio frequency identification reader in its store. 
On the downside, the issues of security, privacy and data protection have been raised as concerns in relation to the use of this technology.

On the issue of security, the concern is that tags could be vulnerable to skimming and eavesdropping, as they might be accessed by a reader belonging to a third party who is not involved in a transaction with the holder of the tag. There is also the issue of whether the storage and transmission of personal information through tags is consistent with Data Protection and privacy laws. These concerns have prompted the European Commission to issue new guidelines requiring businesses to carry out privacy assessment and security audits on tagged products before they can be launched onto the European market.

The use of radio frequency identification technology in retail and other sectors is set to expand over the next number of years, as are the capabilities of radio frequency tags. The European Commission has estimated that there will be 1 billion tags in use throughout Europe in 2011.

Contributed by Carol Plunkett