Financial services have a lot to explore when it comes to quantum computing capabilities as we progress towards a truly digitised fintech era. Together with artificial intelligence (AI), it paves the way for faster and smarter optimisation of portfolios and investments. While major investments in quantum technology have already started happening in the US, China, Germany, Canada, India, Japan and several other countries. The United Arab Emirates (UAE) has also significantly invested in technology with a vision to solve the problems that only quantum computers will be able to manage in the future.
Quantum computing is an emerging technology that needs to mature in multiple ways to fulfill its wide range of promises. In the past, it was a difficult situation to simulate and analyse quantum computers, but now these quantum computers are offered online or on the cloud to test their capabilities and discover the benefits. The quantum computing prospects for financial institutions are tremendous as they deal with big data and have the potential to facilitate banks in efficiently dealing with uncertainty and optimisation issues. The good news is that, intending to optimise the opportunities, banks and financial services companies have already started experimenting with this technology to explore and unlock its potential benefits.
Globally, there are many banks shifting their strategies, conducting research and testing to see what can be adopted from quantum offerings or solutions to make banking faster, safer, and easier. The technology is already being tested across multiple functions in financial services—ranging from cyber security, risk profiling, pricing, fraud detection, trading algorithms, and portfolio optimisation. Quantum computing can offer an edge to financial institutions in many ways. Some of the potential application areas are:
ML algorithms: Currently, ML algorithms are used to estimate the risk levels of loans by checking credit scores, consumer behavioural patterns, spending patterns, etc. The time required to train an ML algorithm is directly dependent on the number of data dimensions considered. It will exponentially increase when data dimensions are greater. With “Quantum speedup,” ML tasks on quantum computers can be performed faster.
Optimisation Models: Financial institutions run numerous calculations every day to achieve optimisation. Large batches of transactions related to credit, collateral, and liquidity are put in for various calculations to determine constraints. Wherever these optimisation calculations are complex, current systems need more time to tackle them. On the other hand, quantum computers could achieve much more precise optimisations in a fraction of the time without the necessity to use approximations.
Risk Profiling: Financial services use various simulation methodologies to determine pricing and risk management. These simulations are very intensive and complex. Many a time, a lot of assumptions are factored which will lead to compromises on accuracy or efficiency. Quantum computers can perform real-time data simulations and simplify the models.
Quantum Cryptography: Current encryption methods would be compromised when quantum computing is used to decrypt information secured by current public-key encryption methods. Quantum cryptography uses the properties of quantum mechanics to encrypt and safeguard vital data. Quantum key distribution (QKD) is used to exchange keys securely between sender and receiver.
Targeting & Prediction: In prediction modelling and customer targeting, quantum computing could bring in a paradigm shift. Quantum computers’ data modelling capabilities are expected to provide superior results in performing classifications, making predictions, and finding numerous patterns.
Dawn of a new era
Despite the challenges in quantum computing today, growth indicators signal a bright future. Integration of quantum computing with other cutting-edge technologies can solve applications in secure online banking, prediction, optimisation, transaction speed, consumer experience, cybersecurity, etc. If experts are to be believed, in the next two to three years, quantum computing will reach the next level of milestones and significantly impact financial institutions. It is high time that financial institutions realise the potential that quantum computing holds in ascertaining a secure future. Latest research reports ascertain that big players in the financial services industry have already started investing in quantum computing technology to test various use cases. Financial institutions that act promptly and adopt this emerging technology would gain a first-mover competitive advantage.
The Middle East’s fintech ambitions will also be well served by an early plan for quantum computing. The UAE has been active in this area with its introduction of e-banking, e-dirhams, online platforms and other initiatives. An early position on quantum computing will assist plans to hone services and control risk using large-scale analytics at speed. To give quantum computing a head start, in partnership with Barcelona-based start-up Qilimanjaro Quantum Tech, Abu Dhabi’s Technology Innovation Institute (TII) formed the Quantum Research Centre (QRC), an international centre of excellence for research into quantum technologies. Once commercialised and made available via the cloud, quantum computing will be an important resource for financial institutions and their ecosystem partners as they strive to maintain both control and service differentiation.
