How quantum computers will revolutionize financial services

Highlight

•       Quantum computers leverage certain principles of physics that allow them to process information more effectively than the computers currently being used.
•       Businesses within the financial industry will benefit from this technology as quantum computers decrease risks, enhance customer services, and increase investment opportunities.
•       This innovation will transform the industry within five to ten years. Leaders and stakeholders in this field should act now, partnering externally and investing internally to make the most of quantum computers. 

What is a quantum computer?

To enable more powerful operations and faster processing speeds, scientists and engineers have worked hard to reduce the size of transistors and other traditional electronic components.. These efforts provide more space for increasingly complex architecture on an integrated circuit – leading to faster and more portable machines. Eventually, however, this trajectory will reach its practical limits, since smaller transistors tend to be less stable.

Enter the quantum computer. By leveraging the principles of quantum physics, these revolutionary new circuits are able to bypass the traditional binary digit (bit) structure that converts all information into either the number 0 or 1. Quantum computers instead process data through subatomic particles called “qubits” – or quantum bits.

These extraordinary units of data can be in the state of 0 and 1 at the same time. This unique capability is known as a superposition, and computers that take advantage of these properties can examine multiple possible data processing solutions simultaneously. Another strength of this computational structure is called “entanglement”, which refers to the tendency of qubits to naturally correlate with each other regardless of distance. Changing just one of these joined qubits instantly affects any others they are tethered to by the forces of quantum mechanics.

Quantum computers use these special abilities to solve complex problems much faster and more accurately than the computers we use today. Traditional computation approaches problems using trial and error (one input at a time) until it finds the optimal solution. Quantum computers are able to instead run simultaneous calculations on each qubit, increasing processing power exponentially.

The current state of quantum computing

So who is leading the quantum computer industry globally? They are, as you may expect, the tech giants IBM, Microsoft and Google. Yet at this early stage, their best efforts remain unable to achieve “quantum supremacy” – a term referring to the moment that these futuristic computers are able to perform calculations that even the most advanced traditional supercomputers struggle to solve.

Other constraints, such as decoherence, remain serious obstacles for quantum computer engineers. Because qubits are very fragile, and also entangled with each other, their collective stability is highly vulnerable to changing external conditions. If quantum computers are disturbed even a little bit by fluctuating temperatures or exposure to radio waves, their qubits can fall like dominoes into altered quantum states.

To make these unique computers practical for widespread use, engineers must therefore find ways to protect them. Possible solutions include supercooled fridges or vacuum chambers surrounding the quantum components, although unsurprisingly these are not yet practical or affordable solutions

Quantum computers and financial services

Despite the hurdles outlined above, many see a promising future for quantum computers – particularly those in the financial services industry. According to IBM, the first essential improvement for customers will be the highly personalized products and services made possible by the type of Big Data analysis that quantum computers are especially well suited to provide.

Another benefit relates to fraud detection. Each year, financial institutions lose up to $40 billion in revenue due to poor data management. However, the integration of quantum computers could lead to far more accurate calculations, helping these organizations make more informed decisions based on huge amounts of data.

In addition, quantum computers could potentially accelerate the credit scoring process, which presently takes as long as 12 weeks. Faster calculations in this area could open up new investment opportunities for financial companies. In such ways, the principles of quantum physics can lead to better decision-making, ultimately improving service quality and the overall customer experience.

The potential here, of course, extends far beyond financial services alone. When quantum computation becomes practical for common application, it can be used to solve all kinds of problems that are today considered too complex to work out. 

Recommended actions for financial business

At present, the relevant technology is still in its nascent stage and quantum computers are only able to incorporate a small number of qubits relative to the amount required for handling complex financial problems. But there is progress being made, and both McKinsey and IBM estimate that quantum computers will begin revolutionizing the financial services industry within the next five to ten years.

To secure their competitive advantage, players within the financial services industry should consider preparing for the quantum computer revolution as early as possible. Recommended steps include recruiting quantum computing experts, and partnering with external institutions, including developers or startups, that have embraced the technology. Large banks around the world, especially in Europe and America, have already made these types of moves – recognizing the close correlation between data processing and growth potential.

The march of technology has undoubtedly accelerated in recent decades. While some breakthroughs have failed to live up to their promise, others have generated an enormous impact on society and the economy. Though engineering problems remain, current indications suggest that quantum computers will represent a significant milestone for human civilization. By riding the wave of progress it brings, businesses in finance and other sectors will be able to vastly improve their own operations, while passing along major improvements in speed and service quality to their customers.

The humble qubit exists at the atomic level, far too small for human eyes to see. Yet it contains tremendous computational power which has still not been fully unlocked. And so we return to our original question: What is a quantum computer? It is a radically advanced future for business and society, waiting to be born.