Emerging Technologies Article

Future Use-Cases of Quantum Technology in Financial Services

The potential benefits of quantum computing in finance:

The finance sector has advanced over the past decade with developments in computer processing and smartphone technology. Problems have become more complex. To deal with these challenges, the industry is turning to innovation and application of advanced scientific techniques like quantum technology.

Quantum computing is a field which applies theories developed under quantum mechanics to solve problems. There are both pros and cons of the impact this will have on fintech. Thus far, reasons have existed to believe that when applied to finance, quantum computing could solve growing problems in critical areas including cybersecurity.

The finance industry has many areas where faster and more secure processing would be welcome. The financial sector has many transactions run by algorithms. Using quantum computing would exponentially increase the speed of these transactions, allowing institutions to scale their processing with less costs as opposed to employing more human or IT resources.

Classical physics vs quantum physics graphic

Faster processing is made possible because, in quantum computing, data is represented using qubits as opposed to traditional binary units (0s and 1s). Qubits are more flexible and allow for a combination of 0s and 1s simultaneously, as compared to previously where data had to be either a 0 or a 1. As such, a set of qubits stores more data than traditional bits.

Take this metaphor for example; if fintech is Marvel’s X-Men, quantum computing is the shape-shifting Mystique, big data and blockchain are Xavier’s Cerebro, and Bitcoin is the disruptive Wolverine.

In addition to data processing, fraud detection is relevant here. Quantum computing could be used to detect fraudulent activities by recognising such patterns of behaviour at a much faster rate than conceivable. This could be achieved in conjunction with machine-learning algorithms using Artificial Intelligence (AI). These two technologies will make constant connections moving forward and get used to forecast future activities with impressive accuracy.

The Open Source Strategy Forum (2017) indicates “Quantum Computing… with key open source initiatives will change the financial services industry forever”.

Quantum computing’s impact on the future of financial services:

Quantum cryptography

Financial data encoded with quantum cryptography is by far more secure than other kinds of digital security. The advent of the internet has made it possible for hackers to take control of remote devices and copy or edit confidential data. One cannot read data encoded in quantum states because they shapeshift by changing states and as such prevent eavesdropping, in addition to other techniques hackers may attempt.

As with most opportunities, there will also be risks, as Ascent (2017) states:

“Quantum related technologies have the potential to massively disrupt a number of areas of IT. In particular, there will be a significant impact on the Financial Services industry… However, with these opportunities also come threats to some conventional security techniques and even business models, as current encryption methods become trivial to break and are therefore rendered useless.”

Quantum cryptography and possible attacks data

Quantum blockchains

The best solution lies in a combination of quantum computing with blockchain technology. This will be the most hack-proof development of the Internet of Things (IoT) era. Until then, quantum computers are a major threat to existing infrastructures, including blockchain, according to Technology Review (2017).

Cryptography in Bitcoin and the quantum computing threat

Quantum transactions

Quantum technology’s ability to handle billions of transactions per second will be a welcome addition to institutions which are constantly overloaded with huge volumes of transactions. Downtime on infrastructures using quantum computing will be close to non-existent. For financial institutions, this will be a relief because their use-cases include a boon for high-speed trading and they will be saved from the embarrassment of crashing systems where users get left with a bad experience or loss of data.

Top 10 supercomputers in the world infographic chart

Quantum data

Quantum computers with enough qubits will be able to analyse all of the world’s information almost instantaneously. Henceforth, they could employ AI to make automated decisions using sets of pre-programmed rules.

Functions such as the approval of bank loans and mortgages will be more automated moving forward. Doing so will make them faster and more efficient with seamless approvals and no delays. According to Prado (2016), portfolio managers will no longer need to worry about slippage costs when they rebalance their portfolios because a quantum system will provide them with the best solutions.

Quantum entanglement explained

In conclusion, the implications of quantum computing will be far reaching. The speed at which major developments occur will increase. Human interaction will only be relied upon to ratify flagged-up solutions. The impact of quantum computing on the financial sector will predominantly be a good thing. With time, advanced AI will make humans freer to focus on life fulfilling functions.

Bibliography

Ascent: Quantum finance opportunities: security and computation [https://atos.net/wp-content/uploads/2017/02/Ascent_White-Paper_Quantum-Finance-FINAL-Nov2016-1.pdf], 2017

Open Source Strategy Forum: “Quantum Computing, Open Source and the Future of the Financial Services Industry” [https://opensourcestrategyforum.org/talks/quantum-computing-open-source-and-the-future-of-the-financial-services-industry/], 2017

Prado, Marcos Lopez de, (2016). Why quantum finance? Quantum for Quants [http://www.quantumforquants.org/quantum-computing/why-quantum-finance/]

Technology Review: “First Quantum-Secured Blockchain Technology Tested in Moscow” [https://www.technologyreview.com/s/608041/first-quantum-secured-blockchain-technology-tested-in moscow], 2017]

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