Why the financial sector needs to prepare for the quantum computing revolution
Back in 2022, Haim Israel, managing director of research at Bank of America, predicted that quantum computing will be “bigger than fire and bigger than all the revolutions that humanity has seen.”
The latest excitement over quantum comes as Google announced a new chip which it claims takes 5 minutes to solve a problem that would take the world's fastest super computers ten septillion – or 10,000,000,000,000,000,000,000,000 years – to complete.
And with 2025 being named as the Year of Quantum Science, the odds are that over the next year we’ll see more claims that quantum computers – machines which can potentially solve problems much faster than today’s supercomputers – will be the giant technological leap that could help solve the world’s pressing problems.
From more accurately modelling how drugs could treat diseases and predicting more accurate train timetables, to formulating defence strategies for a nuclear attack, the UK government and other nations plus the world’s tech giants – including Google, Microsoft and IBM – are investing heavily in it to stake their place in a quantum future.
But what could quantum computing mean for the banking sector?
For a start, it could make many jobs much easier, such as being able to better predict financial risks. Because quantum computers can predict a wider range of possibilities, they will allow the application of what’s called combinatorial optimisation to portfolio optimisation – in other words, find the best way to allocate a portfolio of financial assets to maximise returns while minimising risk. This currently involves a level of complexity that is insolvable for supercomputers which are unable to progress beyond a certain number of variables. Conversely, quantum computers could solve the problem in a matter of seconds.
However, quantum computing also carries risks. There are fears that hackers will be able to apply quantum algorithms to quickly crack the passwords currently used to secure the majority of financial information and assets and tamper with digital signatures, effectively destroying cybersecurity, as a recent report by the G7 Cyber Expert Group (CEG) – chaired by the Bank of England and US Department of the Treasury – warned.
Despite this, many banking executives say there’s no point in rushing to prepare now, because functional quantum computers do not yet exist. This is not actually true – companies including IBM and Toshiba have now built reliable machines. And while banks are unlikely to own their own quantum computers this decade, it’s expected that in the next one to two years financial institutions will start to licence quantum algorithms together with cloud-based access to a quantum computer.
That’s why in the Biscay region in northern Spain, the regional government is extolling a quantum strategy as it recognises its importance. It’s why members of the Quantum Safe Financial Forum (QSFF) – an association of around 35 European financial institutions – argued at a recent quantum conference organised by the Government of Biscay and the Spanish bank BBVA that banks need to start preparing now. Banks cannot sit around waiting for bodies like the European Central Bank or the Bank for International Settlements, the international organisation for central banks, to demand that they look at quantum technology, as the US has done in its Quantum Computing Preparedness Cybersecurity Act, which requires all federal states to quantum encrypt their digital assets. By then, it will be too late.
Migration to quantum safe encryption of all digital assets, communications, and data will take time. Banks should therefore be moving to build teams to handle such a migration, and working on creating an asset inventory. Once an inventory exists, a bank can create a quantum cryptography or key registry to manage all assets.
It’s a question of when – not if – such a security threat will arise. But preparing for quantum also offers advantages, too. Haim Israel’s prediction back in 2022 is perhaps even more stark today. Banks need to prepare for the quantum fire now, or get burned.
Valentín Garcia is the innovation director of Lantik SA, a company charged with the digital transformation of Biscay in northern Spain, including preparing its banking sector for quantum technology.
