Quantum Computing & Financial Technologies

More than a buzzword, quantum computers are today poised to becoming one of the cornerstone technologies powering the 4th industrial revolution. We are rapidly reaching a point in which technological innovation will only be limited by our capabilities in producing increasingly efficient and powerful hardware. This dissonance between our imagination and theoretical computers has led to a rush from the biggest innovators and technology companies to rethink the fundamentals on which computers are based off today and to design the supercomputers of tomorrow.

Classical Computing & Moore’s Law

“Expect significant commercial uses of quantum computers within 5 years” - Arvind Krishna, Director of IBM Research

Moore’s Law (named after Gordon Moore - CEO of Intel) states that the number of components in a integrated circuit doubles roughly every 18 to 24 months. This principal has held true from the 1960’s to today, and computer related hardware has become smaller and smaller, while their power has evolved exponentially. The most powerful room sized computers of 50 years ago pale in comparisons to devices that fit into the palm of our hands today.

One of the major factors responsible for this amazing progress is the miniaturization of transistors in dense integrated circuits. Small components mean that more of them can be integrated within an individual device, forming logical gates able to process binary data faster and more efficiently. This is roughly how electronic devices have worked up until now - data is translated into binary digits (or bits) that the computer can read and interpret into information or commands (imagine a coin flip, for which the succession of flips would deliver a particular message - see this piece as to how magnetism was used to store information).

Conventional computers excel at certain tasks (such as emails or spreadsheets for example), however, the complexity of the circuits we use are reaching a physical limit, with individual transistors reaching the size of atoms. This is where quantum mechanics come into play.

Quantum Computing

   “Quantum mechanics (noun). A branch of physics - the study of phenomenons on an extremely small scale, of objects that are really isolated, or really cold.”

With transistors becoming so small, a strange phenomenon was noted. Electrons (that carry the electronic signal for the transistor to interpret) would be able to pass through a transistor without it being registered through a process called quantum tunneling. This discovery is important as it sets a physical limit to how small a component can becoming before it is rendered obsolete. If we are to continue making technology faster, more efficient, and more convenient, where do we go from here?

One of the most promising paths that has been gaining traction in recent years is in the reinventing of machines capable of processing information with constituent elements obeying quantum mechanical laws, i.e, Quantum Computers capable of processing a whole new basic unit of information, different from the classical binary bit - quantum bits or Qubits. If you think of a binary unit as being represented by a coin flip, then picture a Qubit as a coin spinning on its axis - it falls neither on head nor tail, but exists in both stats until it is recorded through a process called superposition.

There are currently two kinds of quantum computers that are envisioned, the most well known prototypes being IBMs full fledged universal quantum computer, a digital quantum computer able to perform the simulation of physics and more specifically, quantum mechanics, and M-Waves quantum annealers, an analogue quantum computer able to find suitable solutions to optimization problems.

Applications for the Financial sector

Many of the biggest players in the financial sector have been looking into quantum computing as a means to boost their trade, transaction and data speed. Firms such as JPMorgan or Barclays have been working with IBM’s cloud quantum computer for almost a year now to find new applications to this technology, joining other early adopters like Morgan Stanley.

While the integration of such technologies within the everyday financial landscape may sound like science fiction, the reality is that artificial intelligence, blockchain and quantum computers have been making such leaps in the past few years that it isn’t unreasonable to think that within the next decade, these might be the new standard in terms of computing and energy. Already, uses are being found to speed up risk and performance modeling, and improving security and cryptography.

Being a completely different paradigm, the greater computing power of quantum computers should, at term, allow for vast sets of data to be processed more efficiently and faster than any current computer could - opening incredible possibilities in terms of real time predictive analytics (see how the sampling of quantum systems can enable the efficient use of the Monte Carlo methods in the case of the predictive nature of the behavior of financial systems), but also in portfolio optimization, credit scoring and risk analysis.

While other possibility are being studied, quantum technology seems to be a promising alternative to modern systems that might just unlock the capabilities of the devices of tomorrow.

sources:

I - Classical computers:

D-Wave System: Quantum Computing Primer, concepts and terminology - Available at: https://www.dwavesys.com/tutorials/background-reading-series/quantum-computing-primer

II - Quantum Computers:

D-Wave System: Quantum Computing of the real World Today - Available at: https://www.dwavesys.com/sites/default/files/D-Wave-Overview-Jan2017F3.pdf

Qilimanjaro Whitepapers - Next Computing Generation - Available at: https://qilimanjaro.io/static/whitepaper.pdf

III - FinTech

American Banker: Why banks like Barclays are testing Quantum Computers Available at:: https://www.americanbanker.com/news/why-banks-like-barclays-are-testing-quantum-computing?brief=00000158-07c7-d3f4-a9f9-37df9bc10000

American Banker: Quantum lead: How banks can get the most from cutting-edge tech. Available at: https://www.americanbanker.com/news/quantum-leap-how-banks-can-get-the-most-from-cutting-edge-tech?brief=00000161-04ae-d710-ad71-f6beb7c70000

Financial Technology Today: Improving Customer Experience with Digital Technology: Insight for Financial Institutions. Available at: https://www.financialtechnologytoday.com/improving-customer-experience-with-digital-technology-insight-for-financial-institutions/#.XCm3hc1RVEa