Where Will The First Impacts Of Quantum Technology Be Felt In The Banking Industry?

25 Oct

Where Will The First Impacts Of Quantum Technology Be Felt In The Banking Industry?

IDC Lawrence Freeborn
Lawrence Freeborn
Research Manager, IDC Financial Insights
Read full bio  @IDCLawrence

Having written an introduction to Quantum computing a few months back, I plan to examine different parts of the conversation, and how it might relate to financial services in future. Big announcements about quantum keep coming. Microsoft recently announced a quantum computing programming language which will allow developers to build programs using quantum algorithms. Google is also working on achieving “quantum supremacy” – the point when a quantum computer surpasses a conventional supercomputer, and the hope is that a machine which can demonstrate this is could be just months away. And IBM announced another breakthrough in using quantum algorithms to solve longstanding chemistry questions, leading to speculation that this could be the first commercial use of the technology.

This is not to say that the disruption from quantum computing is in any real sense underway. Governments and big technology firms have been pouring money into their research for years now, and many announcements serve mainly a marketing purpose, such that distinguishing between real advances and theoretical “nice-to-have’s” will be a challenge for some years. One example of the latter may be the news that VW conducted an experiment with a quantum computer to optimize traffic flows.

“Commercial applications of robust quantum computing are still several years away”,says Nathan Shammah, a quantum researcher at RIKEN research institute in Japan and the founder of a quantum consulting company, Quantika.

The consensus, indeed, seems to be that the first areas likely to see commercial deployment of quantum technology in the financial industry are not in computing but in the security space, perhaps in a timeframe of three to five years.

Secure communications

Scientists are targeting the possibility of secure communications by leveraging the principle of quantum entanglement, whereby entangled particles are encoded with information and then separated. This relies on the principle that the act of measuring something disrupts or even, at a quantum level, destroy the object. This is known as the “measurement effect”. Attaching a quantum key to information thus allows any attempt at interception or eavesdropping to be spotted. This process of separation is known as quantum key distribution.

An easier-to-comprehend version of quantum communication is based on streams of single photons. If you have a machine which can emit single photons at a time, each of which are encoded with information, the communication system can literally count the photons out and then in at the receiving end spotting immediately if there have been any disturbances. This technology is perhaps not as advanced but single photon emitting machines are being developed by the likes of France-based start-up Quandela.

Some Chinese physicists managed to communicate via entangled photons with a satellite earlier this year. This was a leap forward from previous efforts to send photons via fiber-optic cables here on Earth, which degrade the photons over a much shorter distance than the near-vacuum of space.

Considering the pressure being exerted by ever more sophisticated cyber attackers, the eventual benefits to industry generally and financial services specifically are obvious if totally secure communication systems eventually grow out of these experiments.

Quantum random number generators

A second real-world application of quantum is in the field of random number generators. There are a few bits of the financial industry that depend on the production of random numbers for security reasons. One example is tokenization, part of the process of many payment types including Apple Pay and PayPal, whereby sensitive information is replaced by unique and randomly generated transaction identifiers. User authentication often involves random numbers also. Some banks (including Barclays, Co-op Bank, Nationwide and RBS in the UK) give their customers pin code readers, which use chip and pin to generate random numbers, for example. However, conventional “random” number generators are not genuinely random, but based on complex algorithms, and as such are vulnerable to hacking. A number generator based on the randomness of quantum mechanical properties – such as nuclear decay – can be that much more secure.

Way back in 2014, some physicists proved that the camera sensor on a smartphone is sensitive enough to monitor the effects of individual photons on its pixels, and since light supplied by a conventional LED produces random numbers of photons, this can be used as a random number generator, at least up to 10118 digits, where measurement bias may set in. It is possible that we see quantum transformation based on this Next time. Eventually, we will face hackers who are empowered with quantum technology as well, at which point conventional encryption might find itself obsolete in short order. There are already companies out there, such as Canada-based ISARA, which are preparing for this eventuality.

This is a subject for another blog, though.

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