The U.S. Department of Homeland Security (DHS) will use RFID chips on
a trial basis to track the arrival and return of visitors from abroad.
The testing phase, which will begin this spring and is expected to
last one year, will occur at selected points of entry across the U.S.,
and it will complement the current U.S.-VISIT scheme.
The U.S.-VISIT scheme, which entails fingerprinting visitors, has
encountered criticism, and to date more than 400 people have been
refused entry or arrested as a result of this scheme.
Although the exact way that the RFID chips will be implemented is not
yet known, they will be used to track pedestrians and vehicles
entering the U.S. This move by the DHS is yet anther example of the
growing use of RFID technology.
Business Issues Related to Using RFID
The key business implications related to the implementation of RFID
technology relate to (i) cost of implementation; (ii) supply chain
management; and (iii) improvements in consumer service.
Despite the fact that the cost of RFID tags is declining, and will
continue to decline due to economies of scale, the cost of the tags
only represents a very small fraction of the overall cost to implement
an RFID system. Currently the cost of passive RFID tags is
approximately 40 cents, and if the tags are active, the cost per tag
might increase to a few dollars.
The major cost in implementing an RFID system for a business consists
of the expenditures related to the data management system and
software. A business implementing such a system might end up spending
anywhere from 50 percent to 80 percent of the total implementation
budget on these costs.
One reason, among others, why the data management expenditures are
quite high is that organizations will have to re-engineer their
business processes so as to align and configure their existing systems
to incorporate the RFID system. System integration from the front to
back end will be necessary to achieve the full benefits of RFID
technology.
Given that there are significant capital costs in implementing a RFID
system, it is easy to see why large retailers such as Wal-Mart,
Albertson or Home Depot are leading the initiative.
Supply Chain Efficiency
For those businesses that implement RFID systems, it is expected that
these high upfront capital costs will be offset and eventually result
in gains due to improvements in the supply chain management system.
Businesses incorporating RFID technology expect to achieve significant
reductions in costs by having, among other things, a more efficient
inventory management system, tracking system and reduced theft or
loss.
Aside from the benefit to the consumer of reducing business costs
(assuming that these savings will be passed down to consumers to some
extent), RFID-enabled businesses, especially those in the retail
sector, will be able to provide improved consumer service. This
improved service will come in the form of being able to identify
consumers' preferences by tracking the types of purchases individual
consumers make.
RFID technology, when implemented at the individual item level,
provides an enormous amount of data collection. This information can
be used in effective ways to identify market and individual purchasing
trends. It can also be used to execute very effective and tailored
marketing practices and campaigns.
Legal Implications of Using RFID
The most important legal aspect of using RFID technology relates to
the infringement of individual privacy rights. RFID systems have the
potential to track individuals in an unprecedented manner. If tags are
placed on bags, clothing, cosmetic products, or any single retail item
for that matter, information about the item can be linked to the
purchaser to provide a more complete consumer profile.
For example, when a RFID tag is read, information from the tag could
be linked to a purchaser's financial information if the product was
purchased with a credit card or loyalty card. Moreover, it is possible
for a reader to read tags covertly without the consumer's knowledge.
It is also possible that a reader can be set up to read tags from
other stores. This means that a reader might be able to determine the
contents in a consumer's purse or bag without the consumer even being
aware.
Further and aside from the possibility of tracking consumers in the
marketplace at anytime or anyplace, which in itself raises significant
privacy concerns, RFID tags can be used to track "sensitive-type"
items such as pharmaceutical products or even currency. If tags are
left active, government and industry can track how you use your money,
and what kinds of pharmaceuticals you take.
This presents significant legal problems as our health, financial and
other types of "sensitive" information is not normally allowed to be
collected, used or disclosed without our consent.
Children's Privacy
Another privacy concern in using RFID tags relates to children. As
most companies such as retailers are aware, children represent a
significant segment of the consumer market, even if they are not the
ultimate purchaser of products. However, tracking and profiling
children raises significant legal problems since different rules
regarding the collection, use and disclosure of information apply to
children.
Although the issue of tracking and profiling consumers is frequently
mentioned when discussing RFID technology, this technology also has
enormous legal implications in the area of employee privacy. A RFID
system could potentially track the whereabouts of an employee in the
workplace at all times. This presents significant concerns as employee
privacy might be significantly eroded with the onset of this
technology.
In many jurisdictions including most of, if not all of, the
jurisdictions in Canada and the U.S., the collection, use and
disclosure of RFID data will have to comply with existing privacy
laws.
Therefore, when a company amasses data through the use of RFID, it
will have to do so in accordance with these laws, which means that
they will have to obtain the appropriate consent depending on their
local legal requirements for the various kinds of personal information
they are collecting using RFID. It also means that these companies
will have to take the appropriate safeguards to protect such personal
information.
Based on the foregoing, any organization contemplating the use of RFID
should start by ensuring that it is aware of its privacy obligations
under different laws before it starts accumulating data that can come
back to haunt it later if it has not been collected in accordance with
legal requirements.
--------------------------------------------------------------------------------
.
|
