RFID the next step in consumer-product relations or Orwellian nightmare?

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1 RFID the next step in consumer-product relations or Orwellian nightmare? Nordic Consumer Policy Research Conference 2007 TOWARDS A NEW CONSUMER? TOWARDS A NEW CONSUMER POLICY? Helsinki, October 3-5, 2007 Theme 5: Consumers and new technology

2 RFID (radio-frequency identification) The basic RFID system: 1) RFID tag (transponder) Chip for data storage Antenna 2) RFID reader (tranceiver) Reads data from tag Using radiofrequencies or induction 3) Database

3 RFID-tag vs. barcode Advantage of RFID: RFID-tag RFID can uniquely identify items through an Electronic Product Code (EPC). Itmes can be identified, counted, traced, analyzed Items become individually identifiable Barcode can only identify a product category. Barcode needs line-of-sight to be read Barcodes can store very little information Barcode NB! Today, about 5 billion barcodes are scanned daily worldwide. Need a massive alteration to replace such a successful technology

4 Active/passive RFID tags 2 product groups Active tag: long read range continually radiates information battery powered fairly large/bulky expensive Passive tag: - short read-range - only gives away data when activated by a reader - small (grain of sand) - long-life span, little maintenance - low cost (but still not competing with printed barcodes) Group 1: Products with RFID being a central feature to the product itself (access control, automated toll collection) Group 2): Products tagged with RFID, but RFID not being central for the functioning of the product (tagging of any consumer goods) In the future: more hybrid versions between these two, where RFID is implanted in traditional consumer goods, not only attached to packaging

5 RFID applications today Supply chain management Inventory control Automated toll collection Theft reduction Perceived advantages: -Increased automation - Unique identification - Improved visibilty - Real-time information - Enhanced product information Source: - Instant verification of products (trust) - Post-sales services (product recall, notice of default, product upgrades) Example: Supply chain managment of an apparel company: Managment of stock, orders and distribution - Improved efficiency /cost savings

6 Other RFID applications (1) RFID wristbands for tracking children s movements in amusement parks. Source: Subdermal implants for identification, verification and transaction, i.e. in bars. Source: Tracking livestock; monitoring the wellbeing of animals Source:

7 Other RFID applications (2) * Monitoring health and medication needs of patients * Tracking pets, babies in hospitals (prevent abduction) and pasients (autists or dementia patients) Source: * Identifying employees and access to offices * Tracking various foods due to recent food scandals. Source: Source:

8 Dawning RFID interest in retail Manufacturing and retail interest in implementing RFID closer to the consumer : - Create closer relationship between product and consumer (loyalty) - Identify and track items that people carry - couple with a person s profile Source: Communications of the ACM

9 RFID in retail RFID in retail; interesting application in terms of consumer-related issues: - Deterring shoplifting - Profiling according to interests and shopping behavior - In-aisle companion for product suggestions - Instant recognition of preferences - Marketing methods more targeted and instant marketing, based on predictions - Less excess product inventory and right products at the right time Source: - Address consumer demands for improved and more correct service - Product recalls and product updates / upgrades - Removing check-out lines. Consumers equipped with RFID in mobile devices. Consumers can leave the store and a reader will scan all the items and bill the customer s account

10 Consumer concerns (1) RFID has become controversial; Mixed experiences with pilots performed in retailing, for example by supermarket giants such as Walmart, Metro and Tesco Covert use of RFID has been disclosed and has led to public outcry and consumer/ privacy organisations has engaged themselves through boycotts and critical articles in the press. Walmart has pushed for its top suppliers to implement RFID as it did with the barcode * * * Retailers and RFID proponents have called for counter-strategies to educate consumers about potential benefits and debunk myths that surround this nascent technology

11 Consumer concerns (2) Consumer advocates focus on key concerns: Privacy issues - tracking covert tracking scanning consumer items from a distance consumers being spied on. recordings about location - when a consumer engaged with a specific product. RFID in products leaves an information trail. Privacy issues - behavioural profiling privacy invading technology; profile data can be coupled with instant data gathered from RFID-enabled products that consumers buy or carry with them. can enable price discrimination. provide deep information on consumers shopping habits predictive capability. The Big Brother label has been unavoidable; the idea of a seamless network of millions of RFID readers, billions of tags placed everywhere, huge databases, a constant reading, processing and evaluation of consumer data, predicting consumer behavior, tracking of consumer movements and hence the fulfillmen of an inescapable private sector-lead Orwellian surveillance

12 Consumers own concerns and awareness of the technology? Little research on RFID with a consumer perspective; Study 1): Capgemini studies: - RFID awareness in the US: 23% (42% favorable) - RFID awarenss in Europe: 18% (52% favorable) Top concerns (both US and Europe): Consumer data being used by third party More targeted/direct marketing Tracking consumers through product purchases Tags being read covertly from a distance Study 2): Consumers mistrusting both business AND government intentions regarding RFID Study 3): On prototype item-level RFID retail system; reveals that RFID should not be activated out of store and in homes for post-sale services; consumer control more important than potential commercial benefits. Study 4): Performed in Metro s Future Store in Germany, focused on consumers privacy fears. A dominant perception: deep-seated mistrust in RFID-based environments (73% want RFID deactivated at the counter). Feeling of helplessness when confronting intelligent environments control important.

13 Concluding remarks RFID experience: Consumers have hands-on experience with RFID without knowing (automated toll collection, antitheft tags on clothes). RFID ambivalence: RFID s advantages are its biggest drawbacks (tracking, recording and transferring data). RFID myths: Some claims too far-fetched. Still: technological advancement prove that anything is possible. Fully-fledged surveillance problably will probably materialise, due to proprietary systems, regualtion, costs and the use of passive tags, not active. However; the invisibility and omnipresence of RFID systems, potentially evading consumer conciousness, is a real concern. RFID and consumer responsibility: Increased burden by leaving all choices to the consumer fighting an invisible enemy. RFID opportunities: Aside from the privacy invasion: potential for an empowered, concious consumer (RFID provides visibilty in terms of products content, life-cycle, origin, ethical matters + efficiency gains). RFID a in Nordic context: Learn from mistakes in the US and Europe. Address consumer issues in RFID application testing + in-depth research on RFID in context. Need for coordinated effort between developers, legislators, consumer/privacy groups and research.

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