The core of any RFID system is the transponder which can be attached to or embedded within objects such as a plastic card or keychain.

An RFID reader sends a radio frequency wave to the transponder; the transponder replies by sending its stored data back to the reader. The system functions basically as two separate antennae, one on the transponder and the other on the reader. Data collected from the transponder can be sent directly to a host computer through standard interfaces, or can be stored in a portable reader and later uploaded to the computer for processing.

The automatic reading and direct use of transponder data is often called "automatic data capture." When used with an RFID system, even in environments with excessive dirt, dust, moisture and poor visibility, is superior to the limitations of other automatic identification technologies.

RFID technology creates a very convenient way to pay for goods and services. It can deliver extremely fast transaction times, reduce time spent queuing and eliminate the need for paper receipts. This technology is also ideal for access control, employee cafeterias, fast food restaurants, gas stations, garages and parking lots, ID applications, public transit systems or retail loyalty programs.