RFID stands for Radio Frequency IDentification. It typically applies to a technology that uses radio waves to automatically identify people or objects. While there are various ways to identify, the most common is to store a serial number that represents a person or object identity and possibly other information, on a microchip that is attached to an antenna. Collectively the microchip and antenna represent a RFID transponder or an RFID tag. The antenna gives the chip ability to transmit identity information to a RFID reader. Then the RFID reader converts the radio waves into digital information that can then be passed to the computer for usage. RFID has been around since the 1970s. Since the radio waves from the low end of the electromagnetic spectrum, waves are safe as radio waves from a car radio.

RFID and Bar codes are different technologies and have different applications. The big difference between the two is bar codes are line-of-sight technology. A scanner requires a bar code be brought towards a scanner in order for it to be read. RFID on the other hand, doesn’t require line of sight. RFID tags can be read as long as they are within range of a RFID reader. If a label is somehow removed or damaged there is no way to scan the item.

Currently many forms and sizes such as personal items, services, and products use RFID worldwide. Currently in the United States, most public transportation such as trains, buses, and restaurants such as Mcdonald's all carry RFID receptacles that allow credit card transactions using MasterCard's PayPass. MasterCard PayPass is the payment feature that can be added to any MasterCard payment account to enable payments with a simple tap. PayPass is flexible enough that it can be built into cards or other devices such as key fobs, and can be used in markets that primarily issue smart cards or those that primarily issue magnetic stripe cards.

InfoSync reported that, Motorola and MasterCard are conducting field tests of new mobile phones that include Radio Frequency Identification (RFID) chips embedded in them as part of a cashless payment system dubbed PayPass. The phones will be equipped with Near Field Communication (NFC) systems, which will allow them to communicate with nearby readers to, for instance, pay for small purchases or tickets for transit or events simply by passing their phone close to a reader.

Once the phone and account has been identified by the RFID tag, the user's MasterCard account will be billed automatically by the network for the appropriate amount. MasterCard also sees potential for the phones as contactless readers, which it claims opens the door for "a variety of marketing a 1000 nd promotional applications", on which the company did not elaborate further.

The PayPass trials will be run by the end of the 2006 at various locations in the United States.