Although most commonly used to track and identify goods and materials within supply chains, the technology is also being used in applications as diverse as “contactless payment” systems, passports and patient identification in hospitals.

RFID technology is having a tangible impact on a wide array of industries across the globe, according to a new briefing paper by the Economist Intelligence Unit. Companies in the retail sector have been the fastest to adopt RFID, but programmes in consumer goods, logistics, life sciences, automotive and government are now delivering reduced costs, better inventory control and improved responsiveness to consumer demand.

Although most commonly used to track and identify goods and materials within supply chains, the technology is also being used in applications as diverse as “contactless payment” systems, passports and patient identification in hospitals. Wider industry adoption will help grow the global market for RFID from $1.4bn in 2003 to $10.9bn by 2009, according to US market research firm ABI Research.

RFID is gathering momentum. The decision taken by leading global retailers to mandate use of RFID by their suppliers, aided by the emergence of global technical standards, have eliminated any doubt that the technology will be used on a broad scale. Pilot programmes in retail, consumer goods, logistics, life sciences, automotive and government are under way and are already producing tangible benefits such as reduced costs, better inventory control and improved responsiveness to consumer demand.

The supply chain is becoming smarter. RFID has already made its mark on the supply chain, with companies like Wal-Mart, Tesco and Gillette using it to track inventory and improve stock replenishment. But to fulfil its potential, the technology needs to be integrated into operational management tools such as ERP (enterprise resource planning) software.

RFID works for people as well as things. Outside of the supply chain, a range of other applications are emerging, especially in applications that enhance customer convenience, such as “contactless payment” systems. Another growth area will be in identifying and authenticating people or items for safety or security purposes, such as within passports or to verify a patient’s identity at the operating table.

Much work remains to be done. For all its promise, a range of technical, business and political barriers to RFID’s development still exists. Standards bodies and academic institutions need to harmonise hardware and software standards globally, while companies should lay out a framework that helps them understand and address the process changes required to get value from the technology.

Privacy can be protected without killing RFID. The use of RFID in consumer goods has sparked controversy about consumer privacy. Although some of the concerns raised overstate RFID’s capabilities, there are genuine issues to be resolved, such as the ability for anyone with an RFID reader to track people by the items they wear or carry. This report concludes that legislators should require that RFID tags be deactivated at point of sale to allay privacy concerns, but not require the permanent “killing” of stored data, as this would limit users’ ability to opt-in to interesting post-sale applications that benefit consumers as well as businesses.

“RFID is being used successfully in corporate supply chains, and there are a range of potentially valuable applications in the pipeline,” said Gareth Lofthouse, director of custom research in Europe at the Economist Intelligence Unit. “But for RFID to achieve its potential, the industry must address valid concerns over customer privacy.”