How Does RFID Work in FASTag, Chips, Cards & More (2025)

From contactless credit cards and metro passes to highway toll systems and inventory tracking, RFID technology is everywhere — quietly powering the systems we rely on every day. Whether you're tapping your phone to pay or passing through a toll gate, chances are RFID is doing the heavy lifting behind the scenes.

How does RFID technology work? In simple terms, it uses radio waves to wirelessly transfer data between a tag (which stores the info) and a reader (which retrieves it). This seamless data exchange makes everyday processes faster, smarter, and more automated. In fact, 93% of North American retailers were using RFID in some capacity by 2020¹.

Basically, it’s the invisible magic behind everything from FASTag toll booths to smart shelves in warehouses. Between 2018 and 2020, European retailers using RFID tagging jumped from 27% to 77%². In this guide, we’ll walk through how RFID works, what it’s made of, and how it’s being used in everything from hobby projects to large-scale industries.

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What Is RFID Technology?

RFID, or Radio Frequency Identification, is a wireless communication system that uses radio waves (a type of electromagnetic field) to exchange data between a tag and a reader. It’s like a high-tech handshake that doesn’t need physical contact. That’s why it’s perfect for tasks like tracking shipments, paying tolls, or unlocking doors with a card.

The tech itself dates back to World War II, but modern versions are way more advanced. According to McKinsey, retailers using RFID see up to 5% more revenue thanks to fewer stockouts and better loss prevention — plus a 10–15% cut in labor hours tied to inventory³.

Core Components of RFID Systems

All RFID systems include these essentials:

• RFID tags. These are tiny chips embedded in cards, objects, or labels. They store information and respond to signals from a reader. Passive tags get their energy from the reader’s signal, while active tags have their own battery, allowing them to work at greater distances.
• RFID cards. These are simply RFID tags in a card form — commonly used for secure authentication in payments, access control, and transit systems. If you’ve tapped a metro pass or a keycard, you’ve used one.
• RFID readers (transceivers). These are devices that send out radio waves and listen for responses from tags. They can be handheld (used in inventory checks or by security personnel) or fixed (mounted at doors, gates, or conveyor belts).
• Backend systems. This is the brain behind the scenes. It receives data from readers, stores it, and integrates it with applications — from tracking software to security systems.

Together, they power everything from access cards and pet microchips to self-checkout counters and logistics hubs.

How RFID Works: Step-By-Step

At its core, RFID works by establishing a wireless link between a reader and a tag to exchange data — no wires, no physical contact needed. The reader emits radio waves, which are picked up by the tag, and the tag sends its data back. Here’s how the process plays out in more detail:

Step 1. The reader sends out a signal. The RFID reader generates radio waves that form an electromagnetic field around it. When a tag enters this field — especially a passive one without a battery — it draws energy from the signal to power up its internal chip.

Step 2. The tag responds. Once activated, the tag’s chip transmits its stored information — often a unique ID or relevant data — back to the reader. Active tags, which come with their own power source, can respond from farther away and often carry more data than passive ones.

Step 3. The reader processes the data. The reader captures the tag’s signal and passes the information to a backend system. From there, it can trigger all sorts of actions — updating inventory records, logging a toll payment, unlocking a door, or tracking the movement of assets.

RFID Advantages and Disadvantages

RFID has transformed everything from large-scale industries to everyday life, making identification and tracking faster, more accurate, and fully automated. However, like any technology, RFID has strengths and limitations — be aware of them before choosing RFID for your personal or business needs.

Types of RFID Systems

RFID systems are generally classified in two key ways: by the type of tag they use (based on power source) and by the frequency at which they operate. Understanding both helps you choose the right setup for a specific application — whether it’s short-range access control or long-range asset tracking.

1. Tag-Based RFID Systems

The first way to categorize RFID systems is by the type of RFID tag they rely on — each with different power requirements, range capabilities, and costs:

• Passive RFID systems use tags that don’t have an internal power source. Instead, they draw energy from the reader’s signal to activate and send back data. These tags are smaller, lighter, and cheaper than active tags, making them a great fit for retail inventory, access cards, or library books.
• Active RFID systems use battery-powered tags that continuously or periodically broadcast signals. These are typically used for real-time tracking of high-value or mobile assets, such as shipping containers or fleet vehicles. Their extended read range and larger memory come at the cost of a higher price and size.
• Semi-passive RFID systems (also known as battery-assisted passive tags) fall in between. These tags include a battery to power internal functions like sensors but still rely on the reader’s signal to transmit data. They’re often used in applications like temperature monitoring during shipping.

Here’s a quick comparison:

2. Frequency-Based RFID Systems

RFID systems are also grouped by the radio frequency range they operate in. Frequency affects read range, data transmission speed, and how well the system performs around materials like metal or water.

• Low-Frequency (LF) RFID operates between 30 kHz and 500 kHz (typically at 125 kHz). These systems have a short read range of up to 10 cm and are often used for animal tracking, access control, and simple asset identification.
• High-Frequency (HF) RFID runs between 3 MHz and 30 MHz (typically 13.56 MHz). With a range of about 1 meter, it’s commonly used in contactless payment cards, transit passes, and library systems. NFC also operates in this range.
• Ultra-High-Frequency (UHF) RFID systems operate between 300 MHz and 960 MHz and offer longer read ranges — up to 12 meters or more. This makes them ideal for warehouse management, retail supply chains, and toll booth automation.
• Microwave RFID operates at 2.45 GHz and can reach distances beyond 30 meters. These systems are often used in large-scale tracking applications like vehicle toll collection and industrial monitoring.

RFID Examples: Leading Use Cases

RFID isn’t just some behind-the-scenes tech — it’s solving real problems in everyday life. From speeding up checkouts to helping track cattle on a farm, RFID quietly makes systems faster, safer, and more efficient.

And with the global RFID market expected to grow from $16.73 billion in 2025 to over $29 billion by 2030⁴, it’s clear that industries around the world are betting big on this technology. Let’s take a look at where RFID is already making a big difference:

1. Supply Chain Tracking and Inventory Management

In warehouses, retail stores, and manufacturing plants, RFID helps track products automatically — no manual scanning required. Items and shipments are tagged with RFID chips, and fixed readers placed at entry points or along conveyor belts pick up the signals. This provides real-time updates on stock levels, shipment progress, and product movements.

Since RFID doesn’t need lines of sight like barcodes, multiple items can be scanned simultaneously — even inside sealed boxes. That’s why UHF RFID is widely used in supply chains: it offers long-range, high-speed scanning ideal for tracking pallets and containers. Many of these tags contain an Electronic Product Code (EPC) — a globally unique identifier that helps businesses track individual items across the entire supply chain with precision.

By integrating RFID with inventory software, companies can reduce stockouts, prevent theft, and optimize restocking. In fact, businesses that adopt RFID often see inventory accuracy jump from 63% to 95%⁵.

2. Tolls and Public Transportation

RFID speeds up toll payments and streamlines public transport systems by enabling automatic fare collection. Vehicles and transit cards contain RFID tags that are scanned instantly by roadside or station readers — no more digging for cash or swiping cards.

In India, for example, the FASTag system uses UHF RFID to detect vehicle tags and deduct toll fees automatically as cars pass through toll plazas. Drivers don’t even need to slow down — the barrier opens as soon as the scan is complete. Each FASTag includes a unique 16-digit RFID number tied to the vehicle’s account, allowing for accurate and secure identification. The same principle applies in metro stations, bus terminals, and even parking garages, making travel smoother and more efficient.

3. Retail and Checkout

RFID enhances the entire retail experience — from managing stock behind the scenes to making checkout lines a thing of the past. Products are tagged with RFID chips that store details like price, size, and availability. These tags can be read instantly by scanners at checkout counters or even at store entrances.

Some stores have moved to contactless self-checkout, where customers walk through an RFID gate and get charged automatically for everything in their cart — no barcode scanning, no bagging delays. On top of that, RFID helps reduce theft, streamline restocking, and create a smoother in-store experience for both customers and staff.

4. Access Control and Security

RFID plays a huge role in secure access systems. Offices, residential complexes, and restricted facilities use RFID cards or fobs that unlock doors with a simple tap. These cards contain tags that store user credentials and are read instantly by fixed readers at entry points.

More advanced systems layer RFID with encryption or biometric authentication to prevent unauthorized access or cloning. In parking garages and corporate campuses, RFID-enabled vehicle tags can open gates automatically as an authorized car approaches. The result? Faster, safer, and more efficient entry systems — without the hassle of physical keys or manual check-ins.

5. Healthcare and Patient Safety

Hospitals and clinics rely on RFID to improve patient care, track medical equipment, and streamline operations. Patients wear wristbands embedded with RFID tags, which allow staff to quickly access medical records at any checkpoint — from diagnostic rooms to pharmacies.

RFID also helps track high-value equipment like surgical tools, beds, and wheelchairs, reducing loss and making it easier to locate items when needed. Staff badges with RFID can help monitor movements for safety or efficiency.

This technology isn’t just useful — it’s booming. The RFID healthcare market was valued at $5.51 billion in 2022 and is projected to reach $20.28 billion by 2031⁶, driven by increasing demand for automation and safety in medical settings.​

6. Livestock and Animal Tracking

Farmers and ranchers use RFID to manage large numbers of animals with ease. Tags are attached to ears, collars, or even embedded under the skin (especially in pets), allowing animals to be identified quickly and accurately.

At feeding stations, gates, or veterinary checkpoints, LF RFID readers scan these tags to log activity, monitor health, and manage vaccinations. Because LF signals work reliably around animal tissue and in outdoor environments, they’re perfect for this kind of close-range, rugged use. This makes it easier to comply with food safety regulations, track breeding cycles, and reduce disease spread — all without having to physically handle each animal.

7. Library Management

Many modern libraries use RFID to simplify everything from borrowing to inventory checks. Books are tagged with RFID chips, and readers at self-service kiosks or exit gates instantly scan items being checked out or returned.

RFID also improves anti-theft measures — if a tagged book leaves the building without proper checkout, security gates can trigger an alert. On the backend, RFID helps staff locate misplaced books or manage reshelving more efficiently, improving both organization and user experience.

8. Waste Management and Smart Bins

Municipalities are turning to RFID to modernize how waste is collected and recycled. Bins are equipped with RFID tags, and garbage trucks have onboard readers that automatically log which bins were emptied and when.

In some cities, smart bins also use sensors to monitor fill levels and notify collection teams when it’s time to empty them. This reduces unnecessary pickups, prevents overflow, and cuts down on fuel costs — while improving recycling rates at the same time (and fewer carbon emissions).

9. Contactless Payments

The next time you tap your card to pay for coffee, you’re using RFID. Credit and debit cards contain RFID chips that securely transmit payment details to a reader when held nearby. The same goes for smartwatches, key fobs, and other wearables that support contactless payments.

Modern systems use bank-level encryption and tokenization to keep your data safe while making transactions faster and more convenient — no PINs or swipes needed.

10. Smart Cities and Urban Automation

RFID is also helping build smarter, more connected cities. From traffic flow to building access and waste collection, RFID systems provide real-time data and automation that make urban life more efficient.

Vehicles with embedded RFID tags can pass through tolls, parking lots, or restricted zones without stopping. Public transport systems use RFID for contactless ticketing, while government buildings rely on RFID-enabled ID cards for secure access.

Cities even use RFID to manage energy usage, track public assets, and coordinate emergency response — all powered by simple chips and radio waves.

Security and Privacy Concerns

RFID is great for speed and convenience, but just like any wireless technology, it’s not without risks. Because RFID tags communicate over the air, they can be vulnerable to unauthorized access, tracking, or even tampering if proper safeguards aren’t in place. Let’s break down some of the key concerns — and how to protect yourself or your organization:

• Unauthorized scanning (skimming). Some RFID tags — like those in credit cards or access badges — can be scanned from a short distance, sometimes without you realizing it. This could allow someone to read your data using a hidden scanner. Use RFID-blocking wallets, sleeves, or even clothing with shielding built-in to prevent skimming.
• Eavesdropping. Attackers may intercept RFID signals during transmission, especially if the data isn’t encrypted. This can expose personal or sensitive business information. Choose RFID systems that support encrypted communication and secure authentication protocols.
• Cloning and spoofing. If someone copies the data from an RFID tag, they could create a clone — giving them unauthorized access to buildings, systems, or even payment tools. Cryptographically secure tags (like those using rolling codes or challenge-response systems) make cloning much harder.
• Tracking without consent. Passive RFID tags can be scanned without the user knowing, raising privacy concerns — especially if those tags are embedded in everyday items like clothing, ID badges, or even packaging. Look for tags that offer kill switches, deactivation features, or are designed to be disposable after use.
• Data tampering. It’s rare, but in some cases, attackers could intercept and modify the data being sent from a tag to a reader — altering logs, access credentials, or item IDs. Use digital signatures and systems that verify data integrity in real time.
• RFID reader hacking. Just like any connected device, readers themselves can be a target. If compromised, a reader could be used to collect or manipulate data maliciously. Keep readers on secure networks with firewalls, restrict who can access them, and use intrusion detection tools when appropriate.

How to Implement RFID Technology Using Raspberry Pi and Arduino

Getting started with RFID doesn’t have to be complicated — in fact, it can be a fun hands-on project. Whether you’re learning the basics or building something useful, platforms like Raspberry Pi and Arduino are great tools for exploring what RFID can do. For more advanced, business-grade setups, you'll need industrial hardware and a scalable plan, but the core concepts are the same.

DIY RFID Projects

If you're a hobbyist, student, or just curious, Raspberry Pi and Arduino are perfect for building small-scale RFID systems at home. Here’s a simple roadmap to get you started:

1. What You’ll Need:

• An RFID module (like the RC522 for Arduino, or a USB reader for Raspberry Pi)
• An Arduino board (e.g., Arduino Uno) or Raspberry Pi (e.g., Raspberry Pi 4)
• A few RFID tags or cards
• Jumper wires, connectors, and a breadboard for wiring everything together

2. Connecting the hardware:

• On Arduino, the RFID module connects via the SPI interface.at
• On Raspberry Pi, you’ll typically use GPIO pins or plug in a USB RFID reader for simpler setups.

3. Writing the code:

• For Arduino, use the popular MFRC522 library to read and write tag data.
• On Raspberry Pi, you can use Python with the pi-rc522 or SimpleMFRC522 library.

Your code will read a tag’s unique ID, check it against a list, and trigger an action — like logging the user or turning something on or off.

Example project: Create a simple attendance system. Users tap an RFID card, the Pi logs their ID with a timestamp, and the data gets saved to a CSV file. It’s a fantastic project for classrooms, makerspaces, or small offices.

Professional RFID Setup

For companies and organizations, RFID implementation involves more planning, hardware, and integration. Here’s what a typical enterprise-grade deployment looks like:

1. Planning and Design

Start by identifying your needs: Are you tracking inventory? Monitoring vehicles? Controlling access? Choose between active, passive, or semi-passive tags depending on range and battery requirements. Then select the appropriate frequency band — LF, HF, or UHF — based on the environment and read distance needed.

You'll also need to plan where to install readers, such as entry gates, loading docks, or warehouse shelves.

2. Hardware and Software Integration

Use industrial-grade RFID readers and antennas designed for high-volume scanning. These devices can read hundreds of tags at once in busy environments. Data from the readers flows into backend systems via middleware, which filters, processes, and routes the information to platforms like ERP or inventory management software.

3. Testing and Calibration

Before going live, test your RFID setup in real conditions. Make sure tags can be read reliably from the required distance, and confirm that materials like metal or liquids aren’t interfering with signals. Adjust reader placement and tag orientation as needed.

4. Don’t Forget Security

Large RFID deployments deal with sensitive business data. Use encrypted tags and readers, implement user access controls, and monitor for any unauthorized scanning or network intrusion. Firewalls and segmented networks can add extra layers of protection.

FAQs on RFID Technology

How does RFID work without power?

RFID can work without a power source because passive RFID tags draw energy from the electromagnetic field emitted by the RFID reader. When the tag enters this field, it absorbs just enough power to activate its chip and send its stored data back to the reader. This wireless energy transfer allows the tag to function without a battery, making it smaller, cheaper, and longer-lasting — perfect for applications like access cards, inventory tracking, and pet microchips.

What is the physics behind RFID technology?

The physics behind RFID involves the use of electromagnetic waves to wirelessly transmit data between a tag and a reader. When the RFID reader emits radio frequency signals, it creates an electromagnetic field that powers passive tags or communicates with active ones.

The tag’s antenna picks up the signal, and its microchip responds by modulating and reflecting the signal back — a process known as backscatter modulation. This exchange happens via near-field or far-field electromagnetic coupling, depending on the frequency used, allowing the system to transfer data without physical contact.

What is the difference between RFID scanners and barcode technology?

The main difference between RFID scanners and barcode technology is that RFID doesn’t require a direct line of sight to read data, while barcodes do. RFID scanners can detect multiple tags at once, even through packaging or walls, because they use radio waves. Barcodes, on the other hand, need to be visible and scanned one at a time using light. RFID is faster, more automated, and better suited for environments where speed and efficiency matter, like warehouses or retail inventory systems.

How does RFID store data?

RFID stores data in a tiny microchip embedded in the tag, which is connected to an antenna. The chip holds a small amount of memory — either read-only, write-once, or rewritable — where information like a unique ID, product details, or user credentials can be saved. When a reader powers the tag, the chip transmits this stored data wirelessly via the antenna, allowing the information to be read or updated depending on the tag type.

Can RFID tags be easily counterfeited?

Basic RFID tags can be counterfeited if they lack security features, but modern RFID tags with encryption and authentication protocols are much harder to clone. Tags that store only static data (like a simple ID number) are more vulnerable, while advanced tags use cryptographic methods — such as challenge-response or rolling codes — to prevent unauthorized duplication.

What's the difference between read-only and read-write RFID tags?

The difference between read-only and read-write RFID tags comes down to how the data on the tag can be used. Read-only RFID tags come pre-programmed with a unique identifier that can’t be changed — they’re great for simple tracking tasks where the ID just needs to be read, not updated.

Read-write tags, on the other hand, allow users to store and modify data directly on the tag. This means you can update information like location, condition, or usage history as the item moves through different points in a process. Read-write tags are more flexible but usually more expensive and slightly larger due to their added functionality.

Conclusion

RFID is a powerful, behind-the-scenes technology that’s changing how we track, access, and automate just about everything. Whether you're scanning toll tags, managing inventory, or building a DIY project, understanding how RFID works — and how to secure it — helps you get more out of it. And as the tech keeps growing, so will its role in our everyday lives.

References

1. https://losspreventionmedia.com/retail-rfid-adoption-in-north-america/
2. https://www.statista.com/statistics/1192510/rfid-adoption-in-retail-by-macro-region/
3. https://www.mckinsey.com/industries/retail/our-insights/rfids-renaissance-in-retail
4. https://www.mordorintelligence.com/industry-reports/global-rfid-market
5. https://cybra.com/5-rfid-statistics-manufacturers-need-to-know/
6. https://www.globenewswire.com/news-release/2023/06/06/2682617/0/en/RFID-in-Healthcare-Market-Expanding-Robustly-and-Expected-to-Grow-at-a-15-75-CAGR-to-2031-Says-New-InsightAce-Study.html?utm