Even if you have not heard of RFID or NFC technology, you have likely used or benefited from this technology in your daily life. In this article, we will describe the technology, explain the difference between the two terms, and detail some of its current applications in the automotive and banking industries.

RFID stands for “radio frequency identification”. RFID technology uses electromagnetic waves to read and transmit smalls strings of data, such as bar codes or other unique identification numbers. RFID solutions contain an RFID reader and an RFID tag. The RFID tag stores the unique string of data, and it has a means of receiving and transmitting radio signals, such as an antenna. There are both passive and active RFID tags. Passive RFID tags utilize power from the radio signal of RFID readers, while active RFID tags are equipped with their own power source. RFID readers are able to interpret radio signals from RFID tags and convert these signals into useful data, such as readable numbers. RFID readers then transmit this data to a central server or computer for storage and analysis.

NFC stands for “near field communications”, and this technology is a type of RFID solution. As obvious in the name, NFC technology only works across “near field” distances. Depending on the NFC devices you use, the maximum distance for which NFC technology can reliably work is only about 10 centimeters. Importantly, NFC technology supports two-way, peer-to-peer communication. In other words, as opposed to simply having a RFID reader read the RFID tag, NFC allows these readers and tags to communicate data back and forth.

So, what are the use cases for RFID and NFC technology? As RFID technology works one-way and across distances of 25m up to even 200m, depending on if active or passive RFID tags are used, RFID technology is great for inventory tracking solutions. This inventory tracking can be used in a standard warehouse setting or even in larger settings such as a car dealership's inventory lot. RFID technology is used to track and charge vehicles that go past public tolls in “fast lanes”, where the driver can be tracked and billed later rather than having to stop and pay a toll agent.

Another use case for RFID in the automotive industry is tracking when customers return to the dealership in the car they previously purchased. This visit could be for a service appointment or for a possible new car purchase. An RFID tag on the vehicle can be read by an RFID reader on the dealership's lot. This RFID reader can integrate with the car dealership’s DMS system and alert the dealership staff that the particular customer is on the premises. The car dealership staff can then review the customer’s file to provide a more personable visit or even present custom offers that would be attractive to that individual.

NFC technology, on the other hand, has use cases that fit with its technical specifications of limited range (up to 10 centimeters) and its ability for two way communication. Due to its limited range, NFC technology is generally considered secure, and it is a great solution for mobile, contactless payments. With NFC technology, a user can simply place their phone next to a NFC-enabled pay terminal to complete their purchase. Their NFC-enabled smartphone can transmit their bank card details to the pay terminal, and the pay terminal can then communicate to the smartphone that the transaction has occurred successfully. Another banking application of NFC technology is the use of NFC enabled ATMs. Using NFC technology, bank customers can simply present their smartphone to an ATM which can then verify the user’s identity via their smart phone’s NFC transmission. The ATM can then carry out whichever action the user desires more quickly and without the user having to punch in their PIN (which is susceptible to being viewed by onlookers).

Hopefully this article has helped you understand the difference between RFID and NFC technology. The terms are often used interchangeably, and they are often confused. To read more on mobile solutions in the automotive industry read our blog post here. To read more on mobile solutions in the banking industry, read our other blog post here.