Financial institutions are exploring quantum computing to dramatically speed up immensely complicated calculations and improve their accuracyDownload the report
The best of times
In 1748, American statesman and inventor Ben Franklin wrote “time is money.” The origin of that axiom dates back to Greece 2,000 years ago. Nowhere is that phrase truer than in the global financial services sector (FSS), where gaining an advantage in milliseconds can translate into outsized profits.
The upside opportunity is massive. The 28 largest banks worldwide manage more than USD 54 trillion combined. The US stock and bond markets alone are capitalized at more than USD 70 trillion. In markets this large, creating new algorithms to optimize portfolios, price derivatives, analyze risk, or calculate more accurate default probabilities can have a massive and widespread impact on the long-term success of global financial institutions and their customers.
Today’s financial services environment embodies the philosophy of survival of the fittest. Institutions battle for tiny competitive advantages using the best technologies available. At the same time, some are already exploring next-generation “quantum computing” to dramatically reduce the time required for immensely complicated calculations and to improve accuracy significantly.
Quantum computing, a hot research area in technology research labs worldwide, remains a few years away from having a huge impact on the financial services industry. However, there are compelling reasons to begin assessing the role and potential of quantum for your business now. One easy way to get started is to join an emerging financial services quantum ecosystem.
And while more research is required to successfully run these apps at the required scale and in real-life environments on emerging quantum machines, it’s important to start to identify which high-value problems might profit from quantum algorithms in the future. Now is the time to begin navigating the technology’s learning curve to be ready when quantum computers have sufficient scale and power to run them.
Several types of challenges face financial services firms that quantum computing may address. These challenges include the classification and selection of assets, customers, and vendors by default risk, as well as the detection of fraud, money laundering, or other criminal activities by finding complex variable relations. A series of complex and often concurrent multidisciplinary tasks are required to resolve such challenges. Quantum computers, with greater speed and accuracy, might provide new capabilities in these areas.
Early adoption for early advantage
Programming a quantum computer is fundamentally different from programming a classical computer, meaning there is a non-trivial learning curve. Early quantum computing adopters in FSS are not only more likely to take advantage of the technology’s diverse possibilities, they are also more apt to chart the direction of the industry by setting new standards. Although fully fault-tolerant universal quantum computers are years away, it is essential that organizations engage now as important and promising use cases are being identified, tools and algorithms are in development, and proprietary ecosystems are being formed. Such efforts will coalesce over time, providing first movers with a quantum advantage.
Read the full report for more on quantum’s potential in banking, as well as some straightforward steps organizations can take now to prepare.
Meet the authorsFrancis Lacan, Global Financial Risk Solution Executive, IBM Global Markets
Stefan Woerner, Global Leader, Quantum Finance and Optimization, IBM Research
Dr. Elena Yndurain, IBM Q Consultant - Financial Services, Global Business Services
Nicholas Drury, Global Banking and Financial Markets Leader, IBM Institute for Business Value
Lynn Kesterson-Townes, Global Cloud & Quantum Leader, IBM Institute for Business Value, Global Business Services