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Cashing In on RFID's Benefits

Financial service institutions are tracking data and currency to secure shipments, minimize risk and keep customers satisfied.
By Elizabeth Wasserman
Aug 01, 2006Citigroup, the nation's largest financial services company, reported in June 2005 that backup data tapes containing personal information on 3.9 million customers were lost by UPS during transport to a credit bureau. Citigroup—like ABN Amro, Bank of America and Peoples Bank, which also lost backup tapes last year containing personal information on millions of customers—had to notify its customers of the potential privacy breach under a series of new state laws. Analysts estimate it costs companies up to $1 per notification letter, but the loss of data tapes also can tarnish a bank's brand and put customers at risk of identity theft.

It became clear to the financial services community that a better system was needed to keep track of these valuable computer tapes. A few of the world's largest banks are currently involved in pilots or discussions to see whether RFID can help them safeguard the tapes. The financial services industry is similar to other businesses adopting RFID—such as retail, aerospace and pharmaceuticals—in that it is interested in tracking shipments of physical goods. In addition to backup tapes, financial institutions are testing the use of RFID to secure shipments of currency, bearer bonds, gold and checks from loss or theft.

Banks and credit card issuers are already using RFID technology to offer contactless credit cards or prepaid debit cards, which can speed payments at convenience stores and gas stations. In the past year or so, American Express, Chase, MasterCard and Visa, among others, have rolled out contactless payment systems in select markets around the world (see "The Cashless Reality," July/August 2005).

Now banks are exploring whether RFID can help to personalize customer service. Insurance companies also are exploring future uses of RFID. They would like to replace estimates with real data that can help them more accurately manage risk, underwrite policies and pay out claims.

Securing the Data Trail
Banks amass hundreds of thousands of data tapes, which record a range of information from bank accounts to credit card transactions and loan applications. Most tapes are now tracked with bar codes and can be located and retrieved using those numbers from automated libraries at bank data centers. But banks often need to transport this sensitive client and transaction data to credit-rating groups and federal regulators, as well as between their own facilities. It has been during the transportation process that most tapes have been lost. Tapes also have been misplaced after employees checked them out from bank libraries to verify data.

After the high-profile loss of data tapes, some banks immediately sought to switch to electronic transfers of encrypted data. Other banks turned to a combination of GPS to pinpoint the location of trucks carrying data tapes and RFID to tamper-proof the cases that hold the data tapes. Several other banks are piloting or discussing the use of RFID to tag every data tape cartridge to know who removes the tapes and when, and to track the tapes to their destination.
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