Unleashing the quantum power in banking

While quantum computing remains in its early stages, its potential to reshape the financial landscape is undeniable. Institutions that act now, by investing in research, forming strategic partnerships, and deploying pilot use cases, will be at the forefront of this transformation, writes Phillip Wright, COO at HSBC Vietnam.

In an age where technological breakthroughs are unfolding at an unprecedented pace, the world stands on the brink of a true revolution.

Consider Firesat, an AI tool developed by Google that can detect wildfires as small as a classroom in size, updating its high-resolution imagery every 20 minutes. Or in the healthcare sector, where AI-powered systems, from robotic surgery to advanced diagnostic tools, are set to radically change how medical care is delivered. The realm of AI is no longer a futuristic concept, it is reshaping the fabric of industries today.

As these technologies gain momentum, quantum computing, once relegated to science fiction, is becoming a tangible reality. Particularly for the financial sector, quantum technology promises to be one of the first to make a lasting impact, fundamentally altering banking operations on a global scale.

Understanding quantum computing

Quantum computing leverages the power of qubits, which, unlike traditional bits that can represent either 0 or 1, can represent both simultaneously due to the principle of superposition. This ability enables quantum computers to process vast amounts of data in parallel, solving problems exponentially faster than classical systems.

Another key principle, entanglement, allows qubits to be interconnected in a way that the state of one directly influences the state of another, regardless of distance. This interconnectedness opens the door to more complex and innovative computational models, enabling unprecedented problem-solving capabilities.

How quantum transforms banking sector

The application of quantum computing in finance is multifaceted. According to McKinsey, it has the potential to unlock up to $700 billion in value for the global banking industry by 2035.

One of the immediate impacts will be in risk assessment and decision-making. Banks rely on sophisticated models to evaluate credit, investments, and portfolio management, but these models require immense time and computational power. Quantum computing could enable real-time simulation and optimization of multiple variables, streamlining decision-making and improving outcomes. Pilot programs exploring quantum-enhanced portfolio management and derivatives pricing are already underway.

Cybersecurity stands as another critical area of impact. As cyber threats evolve, traditional encryption methods may eventually become obsolete. To stay ahead, institutions are investing in advanced techniques like Quantum Key Distribution (QKD) - a method to secure communications using quantum mechanics. HSBC, for example, has already joined a quantum-secured metro network developed by BT and Toshiba, linking its global headquarters with its data center through QKD, which shows how quantum technologies are making their mark on real-world banking.

Fraud detection will also see a significant boost from quantum advancements. By enabling the rapid analysis of millions of transactions, quantum computers can identify anomalies and suspicious patterns far more efficiently than current systems, enhancing protection against identity theft, money laundering, and financial fraud.

Moreover, quantum computing holds the potential to transform the customer experience in banking. From optimizing loan terms to enhancing high-frequency trading strategies and AI-driven customer service, this technology could dramatically increase the speed, accuracy, and efficiency of financial services.

Several leading institutions are already taking steps in this direction. HSBC, for example, has completed the world’s first quantum-secured transaction involving tokenised gold trading, underscoring its commitment to innovation in digital assets.

The quantum risk: Why preparation can’t wait

However, with the promise of quantum computing comes significant risk, especially for industries like banking or healthcare that rely heavily on data security. As the technology advances, the urgency to prepare for its disruptive potential becomes increasingly clear.

One of the most immediate concerns lies in the vulnerability of today’s encryption systems. While the exact timeline remains uncertain, experts estimate there is a 19-34% probability that a large-scale quantum computer capable of breaking widely used cryptographic standards could emerge within the next decade. Some projections even suggest this could happen within five years. Waiting for these threats to materialize is not a viable strategy, instead, proactive mitigation must begin now.

A further risk is the “harvest now, decrypt later” attack. This tactic, flagged by the G7 Cyber Expert Group, involves bad people collecting encrypted data today with the intention of decrypting it in the future using quantum computing. Any information with long-term relevance such as personal financial data, strategic transactions, or corporate intellectual property must therefore be protected now to prevent future breaches.

Transitioning to quantum-safe cryptography is not an overnight task. It requires a multi-year roadmap involving identification of vulnerable systems, adoption of post-quantum cryptographic algorithms, cryptographic agility, and the deployment of quantum-secure technologies like QKD.

For large global institutions, this also means complying with evolving regulatory and cryptographic standards worldwide. One example is at HSBC, we are not only strengthening our internal defenses but also collaborating with regulators like the Monetary Authority of Singapore to shape industry-wide protocols.

This demonstrates the proactive approach in managing both the opportunities and risks associated with quantum technology. As a result, these efforts have garnered significant recognition. The bank achieved an impressive score of 96 out of 100 on the Quantum Innovation Index and currently holds the second position globally, according to Evident, a platform that tracks AI and quantum readiness in banking.

Looking ahead

While quantum computing remains in its early stages, its potential to reshape the financial landscape is undeniable. Institutions that act now, by investing in research, forming strategic partnerships, and deploying pilot use cases, will be at the forefront of this transformation. This is more than a question of innovation, it is one of readiness. As technology accelerates, the ability to adapt will define the leaders of the next era in banking.

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