Banks have long archived data by using couriers to haul backup tapes to long-term-storage facilities, but transmitting the information electronically is becoming more affordable - and, bankers say, necessary.
Ken Rubin, the senior vice president of corporate marketing for Iron Mountain Inc., said that delivering the data to the data storage company's sites electronically is more secure than delivering it by truck.
Iron Mountain loses fewer than five shipments a year out of 5 million, a far better track record than the post office, Mr. Rubin said.
The most recent lost shipment was in July. City National Bank of Los Angeles said that two backup tapes had disappeared while being transported to an Iron Mountain site. And in June United Parcel Service Inc. said it had lost several tapes belonging to Citigroup Inc. that were being delivered to a credit bureau.
Such incidents have helped make data security a huge issue this year, and many banks that once may have balked at shifting to electronic delivery are reconsidering, Mr. Rubin said.
"What companies are really focused on is chain of custody," he said. "They are focused on tightness of control."
Micky Redwine, the senior vice president of enterprise technology operations for the Memphis banking company First Horizon National Corp., said that banks' interest in transmitting data to storage companies is relatively new.
"There was not much of a market demand as short a time as two years ago, and therefore the market was a very small market and there were fewer companies that were servicing it," Mr. Redwine said.
But he said prices for the massive disk drives that are used when companies transmit data directly into an archive company's systems have come down, "clearly making it a much more viable alternative."
First Horizon stores paper documents with Iron Mountain and uses its own data centers in Dallas and Memphis to back up electronic files.
Much of the information banks send by tape is unencrypted. Iron Mountain recommends, but does not require, that clients encrypt data on tapes they deliver to the storage company, and will not encrypt the tapes upon receipt. Clients must encrypt data that they transmit to Iron Mountain.
Mr. Redwine said that after the Citigroup incident, First Horizon's board mandated that Iron Mountain encrypt "anything that we allow to leave our facility."
One reason bank have been reluctant to shift from couriers to transmission is that it can take a long time to send large amounts of data through electronic pipes. Mr. Rubin said the information stored on 300 tapes, even if compressed to half its size, can take as long as 82 hours to send, even using extremely powerful and expensive network lines. Those same tapes can be shipped in one van to an Iron Mountain facility mere hours away.
Mr. Redwine said encrypting data can lengthen the entire transmission process by as much as 50%. That "has a direct and calculable cost associated with it," he said.
Guillermo Kopp, the director of the cross-industry practice at TowerGroup, a Needham, Mass., unit of MasterCard International, said that data requires as much protection as cash, and since it often "gets moved around in the open, you need an armored truck."
In fact, backup data - especially if it contains account information - can be even more valuable to criminals than cash because it is easier to move around, Mr. Kopp said.
"If cash gets stolen on Main Street, U.S.A., it doesn't by act of magic appear in a rogue nation 10,000 or 20,000 miles away," he said. "It needs to be transported." But data from a stolen backup tape is very easy to transmit across the world, he said.
In most cases, and especially for sensitive information, moving it to an archive electronically "is the way to go," he said.
Jacob Jegher, a senior analyst for the Boston market research firm Celent Communications LLC, said banks have been slow to realize that they a shipment of data tapes can be vulnerable. "They've taken the security aspect of it for granted," he said. But as identity theft becomes more common and customer data more prized by criminals, "that can't be taken for granted anymore."
"The ideal method for backup is electronic," Mr. Jegher said, "and that's a very new area in terms of banks going down that road." Many banks still consider it too new to try, but "over time, this is all going to move into electronic means."
