When quantum computing technology arrives in full force, it will create as big a reversal of our established systems as the advent of Generative AI. Some of these reversals will make banking jobs much easier, as quantum computers have the ability to accomplish in seconds tasks that would take a classic supercomputer thousands of years.
For example, quantum algorithms will allow the application of combinatorial optimisation to portfolio optimisation; currently one of the major bottlenecks when it comes to predicting assets. Applying combinatorial optimisation to investments involves a level of complexity that is a truly insolvable problem for supercomputers, which are unable to progress beyond a certain number of variables.
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However, quantum computing also carries some alarming risks for the banking industry. There are well-publicised fears that bad actors will be able to apply quantum algorithms to RSA-2048 and thereby easily crack all the passwords currently used to secure the majority of financial information and assets, and tamper with digital signatures, effectively destroying cybersecurity.
According to some recent reports this is already possible, raising alarm bells that any digital data that has not been quantum encrypted is now vulnerable.
Despite this, we are still hearing many C-suite banking executives saying that there’s no point in rushing to prepare now, as a functional quantum computer does not yet exist. This is not actually true; six companies including IBM and Toshiba have now built reliable quantum computers. What is true is that banks are unlikely to own their own quantum computer this decade. However, we expect that in the next 12-24 months banks will start to licence quantum algorithms together with cloud-based access to a quantum computer.
The Rubicon of quantum advantage
Banking executives also routinely argue that the Rubicon of quantum advantage – meaning that a quantum computer has outperformed a classic supercomputer – will not be crossed for 5-10 years. However, start-ups actually working on quantum algorithms say they expect to reach quantum advantage within 12 months. The breaking of the quantum advantage barrier is not, however, a stark line that once crossed will launch us into the quantum future. It a diffuse region that will be explored by claims, counterclaims, refutations and refinements of the technology.
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By GlobalDataQuantum Safe Financial Forum
For this reason, members of the Quantum Safe Financial Forum (QSFF) – an association of around 35 financial institutions gathered under the umbrella of Europol – argued at last month’s Banks in Quantum conference, organised by the Government of Biscay and the BBVA bank, that banks need to start preparing now for the quantum advantage barrier to be crossed.
Banks cannot, QSFF members argued, sit around waiting for the European Central Bank or Basel 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.
Banks must begin to create an asset inventory
This is particularly true because migration to quantum safe encryption of all digital assets, communications, and data will take time for a bank, probably at least 10 years. Banks should therefore be moving to build a team with the right skills to handle such a migration and putting the team to work on the time-consuming task of creating an asset inventory. We know financial institutions that started compiling such as inventory a few years ago and have not yet finished, in part because they are in part having to do so manually in the absence of the appropriate solutions which the industry badly needs. Once an inventory exists, a bank can create a quantum cryptography or key registry to manage all assets. If a bank starts this work now at a slow pace the cost will be almost minimal. Compare this to the cost if a data security crisis suddenly arises and all work must stop while a huge and urgent quantum security program is created.
It’s a question of when, not if, such a security threat will arise. Indeed, cybersecurity threats and the quantum advantage barrier are two sides of the same coin, because there is a quantum advantage in hacking banks’ systems. Whilst there is still uncertainty as to when quantum advantage will be achieved, there is no doubt it will happen, and when it does it may threaten the nature of banks’ businesses and potentially entire economies.
Given this certainly, there are ‘no regret’ steps that all banks can start taking now to stand them in good stead no matter when it comes. This includes the normalisation of quantum tech, exploring quantum algorithms as they come onto the market, and seeing quantum not as a threat but as an alternative technology which can solve day to day banking problems.
Valentín Garcia is the innovation director of Lantik SA, a company charged with the digital transformation of Biscay, in the Basque Country. He is spearheading the Biscay Quantum Advanced Industries Strategy, launched this autumn to create a quantum tech ecosystem in the Biscay region.
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