Although it is still at an early stage, the quantum revolution is coming fast around the corner. The rapidly changing landscape of financial services is about to experience a tectonic shift. Banks no longer have the automatic right to ‘win’ and this makes it imperative that firms adjust within the next 5 years.
What are the clearest signals for the quantum computing revolution?
The world’s leading tech companies have active quantum programs and significant milestones are announced on a monthly basis. This month, IBM unveiled the largest and most powerful quantum computer to date in Las Vegas. In the last three years, venture capital investors have placed $147 million with quantum computing start-ups and governments globally have provided $2.2 billion in support to researchers. And recently, financial firm JP Morgan announced their partnership with IBM Q, to research how quantum computing can improve tasks like risk analysis and asset pricing
In a recent commercial report on quantum computing, Atos revealed the potential benefits and opportunities for firms. The report claims that whilst it is likely to be a decade before quantum technology starts to significantly impact the world of financial services, the potential implications of the technology mean that institutions must prepare for its arrival today.
Quantum Machine Learning
The UK Chief Scientific Advisor has identified four key areas of Fintech Innovation over the next 10 years: Machine Learning, Big Data Analytics, Digital Currencies, and Mobile Payment systems. Despite the fact that quantum technologies do not make this list, they are intrinsically linked to the growth and development of those areas.
For example, Johannes Otterbach, a physicist at Rigetti Computing, a quantum-computer company in Berkeley points out: “There is a natural combination between the intrinsic statistical nature of quantum computing and machine learning.” Seth Lloyd, a quantum pioneer at the MIT: “Manipulation of large matrices and large vectors are exponentially faster on a quantum computer.”
Although technological hurdles have to be overcome, it is likely that an effective fusion of neural networks (machine learning) and quantum computing will take place over the next 10 years. When this happens we will begin to see huge opportunities.
In an age where algorithmic trading makes up more than 95% of all executed trades and where companies are collecting more and more data, efficacious computers and algorithms are a key to gaining an edge over the competition.
“The nature of Quantum Computing makes it powerful for solving complex mathematical algorithms with real world applications. Known quantum algorithms can break encryption, speed-up database queries, improve pattern recognition and offer a variety of analytical speed-ups.”
New methods of communicating and interacting with financial services digitally, as well as the continuing improvements in computing power and the development of distributed computing methods, have led to increased concerns over cyber security. “It is an ongoing challenge for encryption methods to keep pace with the sophistication and processing power of technology that is capable of compromising the protection they offer.”
Quantum computers promise such a leap forward in compute speed, that they could open up wide-scale and systemic breaches of existing security and governance mechanisms – such developments would be disastrous to the Financial Services market if they are not properly anticipated and managed.
According to the Atos report, the critical period for this will be the next five years. “Beyond that point, the safety of encrypted data transfer cannot be guaranteed, as the advent of quantum computing will be imminent at this point. In ten years, practical national QKD networks will be ready and international networks will follow ten years after that. Such networks will be important for secure communication between companies or different headquarters within companies, as many companies will not be able to construct these networks themselves.”
“In terms of security, this should be done through quantum risk assessments and investment in quantum safe cryptography, such as quantum safe encryption algorithms and QKD networks. There are already commercial entities ready to provide these services, with more companies gearing up to do the same.”
There are both incredible opportunities and threats depending on how firms anticipate the coming of quantum computing. Financial institutions must begin to prepare for the arrival of quantum computing today.
Progress in the design and build of quantum computers will continue through academic research collaborations such as the UK Quantum Computing Hub and QuTech in the Netherlands, and technology companies such as Google and Lockheed Martin. However, it can only be through engagement with academia, or in-house research, that effective quantum algorithms with direct financial applications will be produced.
The ability to produce and patent quantum algorithms prior to the advent of quantum computing in finance will provide a large head-start for businesses when they become more commonplace. In the early stages of the implementation of quantum computers in finance, the hard limit on computing ability will be in the hardware available; the edge a company can gain over rivals will come through software development.
Atos is a leader in digital services and have around 100,000 employees in 72 countries. Serving a global client base, the Group provides Consulting & Systems Integration services, Managed Services & BPO, Cloud operations, Big Data & Cyber-security solutions, as well as transactional services through World line, the European leader in the payments and transactional services industry.
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