Banking should start testing out quantum ideas

Banks should be setting up a quantum computing taskforce, a report from UK Finance has concluded.

The Identifying and seizing the opportunities presented by quantum technology report, produced in conjunction with IBM, lists several areas where banks can benefit from quantum computing. These include risk analysis, compliance, and the use of quantum safe encryption to improve data privacy portfolio optimisation and asset management where quantum computers are used to process complex calculations rapidly, identifying optimal investment strategies.

Along with setting up a taskforce, UK Finance recommended that banks start investing in quantum computing education and training and work with quantum computing research institutions and industry partners.

While simulation and optimisation are listed as application areas that would benefit from the computational power quantum computers can potentially deliver, it is the area of artificial intelligence and machine learning where the authors of the report believe is the first place to start investigating the potential uses for the technology.

The report states that quantum computing could be used to create machine learning models which could detect different patterns that current classical methods cannot obtain, whilst needing less data to train and less time to derive insights.

According to UK Finance, this could lead to more accurate and timely predictions, helping financial institutions to better assess risks, detect fraud and support anti-money laundering efforts. UK Finance also sees quantum-enhanced AI being used to enhance customer experience by providing personalised financial advice and service offerings, tailored to individual needs and preferences.

Jana Mackintosh, managing director of payments, innovation and resilience at UK Finance, said: “Quantum computing is going to transform the financial services industry, it’s just a matter of when. It represents a multibillion-pound opportunity, from new levels and speeds of risk analysis to radically streamlining compliance processes that currently cost the sector billions every year.”

Looking at the potential to improve risk analysis, the report’s authors looked at the limitations of traditional risk analysis methods, which are constrained by classical computing limitations and often involve simplifications and assumptions that can lead to inaccuracies.

The report stated that quantum computing has the potential to better represent the complexity of real-world financial systems by speeding up the calculation of these risk measures, enabling financial institutions to model a wider range of scenarios and calculate probabilities more accurately and efficiently.

“This enhanced risk analysis capability allows for better-informed investment and business decisions, ultimately leading to improved financial stability and resilience,” the report’s authors wrote.

One example of a bank looking at this is Barclays, which is collaborating with IBM to explore the use of quantum computing in risk analysis and optimisation. The report’s authors said the partnership focuses on areas such as credit risk analysis and collateral management.

“We must be ready. Industry and government must work together now to secure the financial services industry against these threats, and put the UK at the head of the pack to seize the opportunities. In these reports, we set out five recommendations to do just that and ensure the UK is not just quantum safe, but ready to lead in this transformational technology,” Mackintosh added.