How quantum computing could reshape financial services

The financial services industry is poised to be one of the first to experience the disruptive impact of quantum computing, once a realm of theoretical physics.

At a panel discussion during the recent Singapore FinTech Festival, experts from academia and industry delved into the potential of the technology, outlining how it will shape finance in the coming decade and beyond.

Julian Tan, supply chain transformation and quantum business development executive at IBM, explained quantum computing’s revolutionary nature: “Quantum computing is not a faster GPU [graphics processing unit] or a faster CPU [central processing unit] – it’s a completely different paradigm of computing.

“Classical computing is very good at detecting strong signals while quantum computing is good at detecting weak signals. Think of quantum computing as adding colours to television, so you get a lot more signals you couldn’t detect before.”

Tan also used the analogy of a mouse navigating a maze compared to smoke permeating it simultaneously to illustrate the difference between classical and quantum computing. “The parallelism creates tremendous opportunities for solving very hard computational problems,” he explained.

The panel identified four key areas within finance where quantum computing is expected to have the greatest impact: risk management, investment management, fraud detection and customer analytics.

Professor Ying Chen, director of the Centre for Quantitative Finance at the National University of Singapore (NUS), highlighted the potential of quantum algorithms for tackling multi-objective optimisation problems. “When you consider multiple factors like profit, risk and sustainability, the problem becomes much more challenging for classical computing, and in this case, quantum computing can deliver faster results,” she said.

Classical computing is very good at detecting strong signals while quantum computing is good at detecting weak signals. Think of quantum computing as adding colours to television, so you get a lot more signals you couldn’t detect before

Despite its potential, Chen cautioned against the hype surrounding the speed of quantum computing, noting that some claims of exponential performance of quantum computers stem from using inappropriate benchmarks. “Instead of focusing on solely quantum or classical, we should fuse them and understand which approach is best suited for each problem,” she said.

Michael Low, deputy director for curriculum development and digitalisation and head of finance and technology programmes at Singapore Management University (SMU), highlighted the potential of quantum computing to transform risk management by analysing vast datasets. “Quantum algorithms can also solve highly complex optimisation problems, and this can be applied in asset allocation, reducing transaction times and operational inefficiencies,” he added.

Low stressed the need for organisations to invest in “quantum literacy”, preparing their workforce even before the technology matures. However, he also warned that quantum computing could render current security protocols obsolete, exposing sensitive financial data to significant risk. He urged financial institutions to invest in quantum-resistant encryption models and advocate for transparent and ethical quantum policies.

IBM’s Tan pointed out the threat posed by Shor’s algorithm, which could potentially break widely used asymmetric encryption methods like RSA. He emphasised the importance of transitioning to post-quantum cryptography (PQC), although he acknowledged that deploying PQC is a big undertaking that could probably take 10 to 15 years.

He underscored the urgency of the transition, however, given the potential for data harvested by threat actors to be decrypted in the future, even if quantum computers aren’t powerful enough to do so today. “Companies should think about protecting their most valuable data now,” he said.

The panel also addressed the issue of talent development. SMU’s Low advocated for a multi-faceted approach, including upskilling existing staff, cross-disciplinary hiring, and fostering collaboration between industry and academia.

NUS’s Chen suggested leveraging international partnerships and providing hands-on experience to aspiring quantum professionals, while Tan highlighted the abundance of free resources available for learning about quantum computing, encouraging individuals to explore and experiment with the technology.

Addressing a question from the audience about the perceived need for a PhD to enter the quantum computing field, Chen said: “You do need a PhD if you want to write a theoretical paper, but if you just want to use this emerging technology, then what you need is training and hands-on experience.”

On Singapore’s potential to become a leading quantum hub for financial services, Tan expressed confidence in the city-state’s ability to leverage its existing strengths in technology and business to drive quantum innovation.

“Singapore has always been very successful at the intersection of technology and business domain,” he said, pointing to the recent announcement of up to S$100m in funding for artificial intelligence and quantum technologies in the financial sector by the Monetary Authority of Singapore.