Earlier this year, researchers devised a breakthrough method for creating supremely pure silicon – the fundamental material in quantum computers. Imperfections in existing silicone mean that today’s quantum computers can maintain coherence (or more simply, operation) for only a fraction of a second. This newly-created, ultra-pure element sustains coherence for longer – paving the way to a scalable product.

The co-supervisor on the project, professor David Jamieson, from the University of Melbourne, pointed out that reliable quantum computing promises a step change across all of society – including in artificial intelligence, data, and communications. These are some of the key tools in the financial services trade – so what does it mean for the sector? How can quantum computing be leveraged to the benefit of institutions and their customers?

According to McKinsey, in just over ten years, quantum-computing use cases could create over $600 billion in value for the industry. This will be generated by sharpening existing processes, and creating new ones – across corporate banking, risk and cybersecurity, retail banking, payments, wealth management, investment banking, and operations.

This article explores four key areas:

1.      Cybersecurity

Customer data held by institutions can be made ‘quantum safe’, using post-quantum cryptography (PQC) and quantum key distribution (QKD).

According to McKinsey, “PQC algorithms are classical, quantum-resistant algorithms consisting of cryptographic problems that are computationally difficult.” QKD, on the other hand, refers to a method of exceptionally secure communication via the implementation of a cryptographic protocol that leverages quantum mechanical principles. In practice, it enables two parties to produce a random secret key known only to them, which is then used to encrypt and decrypt messages.

The key difference between QKD and classic public key cryptography (which relies on the mathematical difficulty of functions) is the fact that QKD exploits photons that are in a Schrödinger-esque superposition (in other words, assuming only a probabilistic cloud in space, as opposed to a defined point) to convey information. Heisenberg's Uncertainty Principle shows that once this superposition is observed, for instance by a third-party eavesdropper, the subatomic particles’ wave function collapses, and thus the communication channel breaks down.  

Crucially though, QKD is based on physical properties and therefore its security is derived from purpose-built machines. This means that in the short term, PQC is more realistic for financial institutions because it can be accessed via software-as-a-service. Institutions looking to benefit from QKD will have to rent dedicated fibre connections or physically manage free-space transmitters, until the requisite hardware becomes more affordable and widely available.

Such quantum security features would no doubt have prevented the leaking of banking information from the Ministry of Defence’s payroll system at the hands of China-sponsored hackers – and will no doubt be considered by the UK government in the future.

2.      Retail Banking

The use cases of quantum computers in retail banking are similar to those in corporate banking, though the requirements for adoption are more surmountable given the fact assets and volumes around retail clients are smaller.

There is potential here to for banks to enhance the precision of credit-decision algorithms and tighten collateral optimisation.

In terms of credit decisions, quantum technology – thanks to its fundamental ability to occupy superpositions, thus processing far more information than today’s binary digits – can weigh up a far greater variety factors; ensuring customers are happier and better served. When it comes to collateral optimisation, the technology may be able to incorporate more values and data types as boundary conditions.

3.      Payments

The colourful world of probabilistic wave functions also hails a new era of transaction security and payment speed – even when compared to blockchain.

The birth of quantum payments, for instance, would eradicate the industry’s challenge of money laundering over the blockchain. This is because a quantum state is unfalsifiable; it cannot be replicated. The key enabler of quantum payments is the aforementioned QKD hardware.

The careful realisation of quantum money could revolutionise the broader banking ecosystem – tightening security for intra- and interbank trades, particularly when founded on QKD protocols.

There are benefits for payment fraud detection, too, with quantum developments serving to upscale rule-based heuristics. With new kinds of transactions inbound, this technology will only serve to boost the accuracy of fraud-detection algorithms.

4.      Operations

Today, machine learning is deployed by many banking call centres – using data to improve scheduling operations. Quantum computing, however, has the ability to classify jobs more precisely, assigning tasks to the correct operator against considerations such as sophistication and complexity. This will have the effect of highly optimising workforces within financial institutions and boosting their relationships with customers.

In its report on the topic, McKinsey points out that the technology “lends itself to solving problems of natural-language processing because of the large amount of data and number of boundary conditions inherent in language.”

Once quantum computation has had time to find its feet in call centres, improvements in data quality and privacy will mean the machines may support even the most challenging of operational tasks.

A cautious optimism

Despite the promises of quantum technology, it is not time for financial institutions to throw caution to the wind. These futuristic computers may also be able to crack today’s encryption – putting customer data at risk.

Firms must communicate with regulators today and study their systemic weaknesses to avoid potential financial and reputational damage.

For some, this technology seems a concern of the distant future, but quantum computers are already being tested – and predicted to be fully operational in a decade. It is in the interest of institutions to be proactive and make space for this technology in their offering, while also ensuring all security systems are ‘quantum resistant’. Doing so now will promote the overall performance and stability of the financial sector for decades to come.

Now that’s a benefit not even Schrödinger could have predicted.