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Privacy & Profits

Consumer concerns about privacy invasion could undermine RFID deployments. By following established best practices, companies can protect consumer privacy, avoid bad publicity and enhance customer loyalty.
By Mark Roberti
Jun 01, 2005—The ability to collect, analyze and share digital information at very little cost has been a boon for businesses seeking to understand both their own internal operations and the behavior of their customers. But it's also given rise to fear among consumers of large, anonymous corporations trading on their personal secrets for profit, of skilled computer hackers stealing their identity, and of spyware tracking every Web site they visit and every e-mail they type.

And now, along comes radio frequency identification, a technology that can be hidden in products, and which privacy advocates say is akin to digital fingerprints that could be used to track consumers' every purchase—indeed, their every movement—without their knowledge or consent. It's no wonder 65 percent of the more than 7,000 U.S. consumers surveyed by online researcher Artafact and market intelligence company BIGresearch were concerned about the technology.

The big concern about RFID tags is that the unique serial numbers they contain could be tied to the individuals who purchase tagged products, and as readers proliferate, these unique numbers could be scanned without people's knowledge. Consumers would be leaving digital fingerprints everywhere they went, which could be used by governments bent on controlling those who opposed their policies, or by companies that wanted to build up large databases of information on the movement and purchasing habits of customers.

Companies need to start addressing these concerns. Why? Because by showing good intent now, they can stave off legislation that would restrict the use of RFID and avoid negative publicity that could damage a manufacturer's brand or cost a retailer customers. Acting responsibly and building trust might actually enhance customer loyalty and help companies achieve a competitive edge.

All discussions about protecting consumer privacy start with the Fair Information Practices, which trace their origins to a 1973 report by the U.S. Department of Health, Education and Welfare. These practices can be summed up in four words: notice, choice, access and security. EPCglobal, the nonprofit organization promoting the use of Electronic Product Codes to track products, has embraced these principles in its guidelines for the use of EPC tags in consumer products (for more information, see Getting Privacy Right).

Unfortunately, the Fair Information Practices alone are not enough to prevent privacy dustups when it comes to RFID. That's because the technology is new and widely misunderstood and because tags put in products by one company can be read by anyone with an EPC reader (the practices did not envision companies putting devices in products that could allow anyone to collect data on a person). Your company needs to go further to ensure that the technology does not have a negative effect on your relationship with consumers. Here are some best practices you should follow when deploying RFID in a consumer setting.

Understand what the reaction might be.
At this early stage, companies should engage privacy and consumer groups before implementing RFID in a consumer setting, to get feedback on their plans. In 2003, Marks & Spencer (M&S) consulted two groups in the United Kingdom and one in the United States before launching a pilot that involved tracking clothing items as they moved from a distribution center to one store.

By discussing its plans with these groups, Marks & Spencer was able to address their concerns when it deployed the technology. For instance, one of the major concerns of privacy groups was that tags put into clothing or other products to track inventory could be used by criminals or the government to identify someone. To prevent that possibility, Marks & Spencer worked with its supplier to develop an RFID transponder that's embedded into a hangtag, which the consumer cuts off at home.
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