The new system was designed by Simon Moorcroft, 22, studying network computing and Ben Abnett, 24, studying computing and IT.

Their idea incorporates radio-frequency identification (RFID) tags which remotely retrieve data for the purpose of vehicle identification using radio waves. These tags will be situated in the bottom right hand corner of car window screens so they can be easily scanned by traffic officers using Nokia 6131 NFC phones.

NFC is a new, short-range wireless connectivity technology, similar to Bluetooth, with increased speed and effectiveness, which enables users to receive and share information more efficiently.

The tags will contain information about the registered driver of the car, the validity of the tax disc, MOT details and insurance.

It is the first year Innovision Research and Technology has aimed a competition at UK-based organisations. The company launched the competition to find the most innovative design ideasincorporating NFC enabled phones to efficiently encode RFID tags with a memory of 96 bytes.

It is hoped the winning design will provide businesses with a valuable insight into the opportunities and challenges presented by NFC technology.

All of the competition entries were judged on originality and their potential to benefit society as a whole, providing financial rewards for businesses, individuals or communities.

The ideas needed to be commercially viable and capable of being produced in large volume manufacture.

In practice the new designs should make a contribution to the way goods or services are delivered to consumers and contribute to creating an effective working environment.

Although the Near Field Communication (NFC) Innovation Awards were open to university students and commercial sector employees, all three of the final designs have been created by students.

Julie Charnock, marketing and communications manager at Innovision Research and Technology, said: "They have all produced very different examples so we will not be comparing like for like, they are all excellent entries."

Ben and Simon came up with the idea as they thought it was the perfect way of preventing the use of fraudulent tax discs and reduce vehicle crime, which costs the country an estimated £3 billion pounds a year and results in rising insurance premiums.

The news they had reached the finalwas announced by their tutor at NEWI, John McGinn, just two days ago.

Ben said: "I was shocked to be honest. We hadn't heard anything since the entry point and now we're in the finals."

Simon said: "We have now developed the device and software so I think we have a very good chance of winning. We're already guaranteed third place."

The finalists will demonstrate their designs in front of a panel of judges before the winner is announced at a presentation ceremony on Friday in London.

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