Finances FYI Presented by JPMorgan Chase
Quantum computing may sound like something out of a science fiction movie. However, large companies such as Google, IBM, and Microsoft are investing heavily in quantum computing research and technology. This revolutionary field, particularly in artificial intelligence and machine learning, has the potential to speed up calculations and information processing dramatically.
How will Quantum Computing impact the financial sector? Exploration of use cases across the industry includes “corporate banking, risk and cybersecurity, retail banking, payments, wealth management, investment banking, and operations and finance.”
Understanding Quantum Computing
This combination of two major fields, computer science and quantum physics, aims to replace “classical” Boolean logic computing with quantum law. The core difference between quantum and traditional computing is the use of bits. Computers have been using bits representing 0 or 1, but Quantum computing uses qubits that can represent 0, 1, or both, opening up vast opportunities. This ability for qubits to be in different states at the same time is called superposition and allows quantum computers to make multiple calculations at the same time.
Entanglement further increases the ability to perform complex calculations by creating interconnected systems of qubits. When qubits interact, they create constructive or destructive interference, increasing the probability of correct results.
Quantum Computing in the Financial Sector
Financial Information Security
For the security of financial information, quantum computing may be both a threat and a solution. While the timeline is unsure, many predict that quantum computing will break the cryptographic
algorithms that currently keep our data safe. At the same time, researchers are exploring if Quantum Random Number Generation (QRNG) can use quantum physics to create truly random numbers for encryption and Quantum Key Distribution (QKD) to exchange cryptographic keys more securely.
Since 2016, The American National Institute of Standardization and Technology has been working towards developing and standardizing algorithms and encryption methods that “are capable of protecting sensitive government information well into the foreseeable future, including after the advent of quantum computers.”
Fraud Detection
The incidence of fraud continues to rise, and Generative AI, which is being used as a tool for creating, scaling, and distributing attacks, is accelerating the growth. It is also used for impersonations and providing the public with access to information and instructions on how to carry out fraud.
Government, educational institutions, banks, and players in quantum physics are working collaboratively on projects like Quantum Shield to seek solutions. As Fraud Magazine puts it: “Quantum technology’s ability to quickly crunch gargantuan-sized datasets and recognize patterns now holds much promise for fraud detection, especially in the banking industry where large sums of money and millions of transactions take place every day.”
Investment Strategies
Quantum computing can also benefit investment modeling by creating faster, more accurate simulations. This can help financial institutions optimize portfolios, better manage risk, and recommend asset allocation. Individuals may also seek to invest in the growing field, where billions of dollars are spent each year on research and infrastructure to use quantum computing in areas such as green energy, medical advancements, and national security.
How Far Have We Come?
As the public and private sectors invest billions of dollars into quantum computing research and development, progress has accelerated. After decades of hypothesis, commercial Quantum computers hit the market in 2010, and in 2016, IBM made quantum computing available on its cloud. On the other side of the quantum computing coin, scientists and mathematicians are also continuing to improve current ones, such as Shor’s quantum factoring algorithm.
Is Quantum Computing here? Not quite yet. Practical uses are still just out of reach with unstable computers and unreliable algorithms. But, as we get closer, it is worth having a basic understanding of what this new field is about, its potential uses, and how it may impact your financial security and decisions.
Finances FYI is presented by JPMorgan Chase. JPMorgan Chase is making a $30 billion commitment over the next five years to address some of the largest drivers of the racial wealth divide.