CONSUMER CONCERNS REGARDING RFID PRIVACY: AN EMPIRICAL STUDY

Journal of Global Business and Technology, Spring 2008 by Razzouk, Nabil Y, Seitz, Victoria, Nicolaou, Maria

ABSTRACT

RFID may not be new to the military but its use in business is rather recent but definitely growing. A number of studies have assessed consumers attitudes toward this new technology and privacy however, as its use rises among businesses, a current assessment of consumer attitudes is needed. The purpose of the study was to assess consumers' level of awareness and attitudes towards RFID and its use in business.

A convenience sample of 203 students from a southwestern university were surveyed regarding attitudes toward privacy, awareness of RFID technology and their level of acceptance of selected uses of the technology in business. Responses were subsequently divided into three groups 1) undergraduate business students; 2) graduate business students; and 3) undergraduate psychology students. Regarding concerns about privacy issues there were no differences between the groups. The only issue that students strongly agreed to was information being used without their consent. Only in the area of selected uses of RFID technology did the groups differ. Findings showed that education did play a role in the perception of RFID implementation. Graduate students were more open-minded in accepting its use as opposed to undergraduate students who were generally undecided about it. When it came to sensitive information such as health, social security and passport numbers, most respondents, as in previous studies, were hesitant if not defiant about giving out such information. Implications of the study were then discussed.

INTRODUCTION

A new technology, at least to many consumers, is helping to facilitate Customer Relationship Management (CRM). The bridge is aimed to draw both consumers and businesses into one meeting position where demands can be satisfied and profits maximized. It's called Radio Frequency Identification (RFID) and although it was used by the military in World War II, it is now being used by businesses to enhance CRM.

In business RFID is now being used in tires, pharmaceuticals, poker chips, custom wood products, credit cards and e-passports but most notably in retailing where acceptance has yet to prevail among consumers (Pate, Blaylock and Southward, 2007; Laurie, 2007; "Consumer Reports Finds.. .", 2006; Swedberg, 2008). In business-to-business transactions RFID technology significantly reduces costs and serves as a mechanism to track products when recalls are made (Pate, Blaylock and Southward, 2007; Hariton, Lawford and Palihapitiya, 2006).

Like other new innovations, RFID is not without its challenges. The biggest of these challenges is the issue of customer privacy - a concern, galvanized by almost every technological breakthrough. Businesses must realize that the cost of obtaining and networking consumer information could ultimately dissipate the privacy of consumers, which will lead to distrust (Hubbell and Redding, 2003, p. 49). Yet, the benefit of passing consumer information by businesses could generate a sustainable competitive advantage and more market share. Consumers on the other hand seem to enjoy the conveniences brought to them through CRM. Hence, the purpose of this study was to assess consumer awareness and attitudes towards RFID and its use in business.

RELEVANT LITERATURE

Privacy, Trust, and Loyalty

Gormley (1992) stated that there had yet to be a definition of privacy that everyone could agree on. As Warren and Brandeis (1990) and Standler (1997) affirmed, privacy laws will continue to change as society evolves and changes. With the onset of 9/11 came the Patriot Act that was recently reinstated to guard our borders and enhance the security of the American People. This act involves the ability of those on the watch for our security to tap phones, look up library cards and other information of suspected "terrorists or links to terrorists." Hence, in light of these changing realities, the issue of privacy has been diluted. Standler (1997, p. 1) defined privacy as "the expectation that confidential personal information disclosed in a private place will not be disclosed to third parties, when that disclosure would cause either embarrassment or emotional distress to a person of reasonable sensitivities".

Radio Frequency Identification (RFID)

RFID applications were first used in World War II for military purposes and in the 1980s for commercial use (i.e. for highway tolls in USA, Italy, France, Portugal and Norway) (Jones, Clarke-Hill, Comfort, Hillier, and Shears, 2005, p. 356). Since then, numerous studies have been conducted to explain the importance of RFID applications for businesses: in food retailing (Jones, et al., 2005), in supply chain facilities (Twist, 2005), and airline operations (WyId, et al., 2005). On the other hand, only a handful of studies have attempted to measure the perception of consumers regarding RFID, possibly because it is a widely used application in modern businesses that consumers remain relatively unaware of.

When it comes to RFID there are two types: active and passive ("CDT Working Group on RFID .. ., 2006). The easiest are passive RFID tags that don't carry any power supply to transmit data. Electromagnetic readers are necessary to procure the information in the tags and the information is then transmitted only a few feet. Whereas, active tags are able to transmit information on their own and in many cases over 100 feet.