British researchers have unveiled quantum cryptography technology which they promise can revolutionise data security for banks and City firms.

Quantum cryptography is the next-generation data encoding system. Data is recorded on individual photons which change if a third party attempts to view the information.

Scientists from Qinetiq and Toshiba's Cambridge Research Laboratory showed off the technology to leading financial institutions at the Department of Trade and Industry where they created a live, secure and encrypted link between two remote sites.

The demonstrations were intended to show the viability of the systems and to encourage the setting up of prototype quantum infrastructures.

"Security is at the heart of everything the City does and it constantly looks at how technological developments can help improve and assure the integrity and stability of all financial systems," said Charles Ross, of Quantum Information Partners, which organised the DTI event.

"Quantum cryptography offers a number of distinct advantages and could be a more cost effective way of operating."

Toshiba's demonstration also proved that some of the practical hurdles to quantum cryptography have been overcome.

Connections usually have to be monitored constantly, but Toshiba claims to have found a way of stabilising the signal and has had a quantum connection running continuously for seven days.