The future of fintech is written on a quantum computer

Optimising investment portfolios, improving credit risk classifications and achieving greater accuracy in detecting cases of financial fraud are some of the advantages that quantum computing, a promising technology currently under development, predicts for finance.

It first became normal to have a computer at home some thirty years ago, and these devices have evolved in leaps and bounds since the first computer was designed during the Second World War. But technology will not be stopped, and the classic computer we use all the time is no exception. A transformation is on the way that may become commonplace in the coming years – the quantum computer.

The idea of quantum computing, which came about in 1981, was first presented by Paul Benioff who believed that quantum laws could be applied to traditional computing. To do this, the minimum units of information in computing – the classic bit that can be a ‘0’ or a ‘1’ – had to be changed by the laws of quantum mechanics, according to which it can take both values at once.

This change to the “DNA” of computers promised significant improvements, but it took a decade for theory to become reality: the first quantum computer in history arrived in 1998 and twenty years later cam the first commercial computer of this kind.

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This technology, which has been spoken of in concrete terms for a few years now, could be a differential agent in dealing with the future of finance. Researchers, startups and banks themselves have begun to envisage the fintech tasks that could be accomplished through quantum computing, such as financial simulation and process optimisation. Is this a short-term or a long-term promise? In which areas could it be used?

Quantum synergies 

Quantum chemistry, healthcare, artificial intelligence, security, logistics and industry are just some of the areas in which there are many proposed uses of quantum computing. In the case of the banking sector, the link between computing and finance began to arise some years ago. Enrique Lizaso, executive director of the startup Multiverse Computing, explains that this link is relatively new, but that it has a great deal of potential. “The first algorithms in finance began to appear in 2017. They were very simple proofs of concept where they proved that a quantum computer could perform these tasks. And that’s where the race really started”, explains the expert, who will take part in the ‘Quantum Computing to Predict the Future’ InnovaHome Festival event organised by BBVA Open Innovation on 25th May.

The applications of quantum computing in the financial sector will be in simulation, optimisation and automatic learning

In that race, experts agree that applications of quantum technology in the world of finances may be differential tomorrow, although they will arrive calmly and without major leaps.

“The applications of quantum computing in the financial sector slot into three broad groups: simulation, optimisation and automatic learning. This is achieved using algorithms that have been in development during recent years”, which will be applied to these new computers, explains Almudena Carrera, a quantum researcher at IBM.

The applications of quantum computing in the financial sector will be in simulation, optimisation and automatic learning

In that race, experts agree that applications of quantum technology in the world of finances may be differential tomorrow, although they will arrive calmly and without major leaps.

“The applications of quantum computing in the financial sector slot into three broad groups: simulation, optimisation and automatic learning. This is achieved using algorithms that have been in development during recent years”, which will be applied to these new computers, explains Almudena Carrera, a quantum researcher at IBM.

Promising applications… 

The three areas that Carrera mentioned are important within the world of finance. Simulation consists of creating a statistical model to study the results of uncertain scenarios. Applications such as “pricing financial derivatives and analysing the risk assumed by maintaining large portfolios” can come out of this process, says the expert.

In optimisation, quantum computers work to accelerate the liquidation capacity of operations, optimise investment portfolios and “improve the process of matching companies with potential buyers”.

Getting quantum computing to the level we’re looking for will require a balance between software and hardware

In the case of automatic learning, quantum technology can be applied to refining credit risk classifications, carrying out more specific customer segmentation and achieving greater accuracy in identifying fraudulent activities, “like those that happen with credit card transactions”, she details.

The researcher goes on to conclude that “getting quantum computing to the level we’re looking for will require a balance between software and hardware where we work with the algorithms that make it possible, and on developing machines that are capable of handling those processes”.

…but with our feet on the ground 

The theory is correct, but in practice, experts agree that it is still a field that needs time, trial and error. Escolástico Sánchez, head of the New Digital Business Research and Development discipline at BBVA, explains how, as with other financial institutions, they are not currently using quantum computing but are in the research phase.

We’re immersed in a research process to see how far quantum computing could go

“At BBVA we’ve been researching quantum computing since 2018, the point at which we saw that it could have a big impact on the industry. After a year of interviews and documentation we developed six proof of concepts to test those hypotheses. Since then we’ve been immersed in a research process to see how far this technology could go”, Escolástico explains.

One of the problems of this technology is that there is currently no perfect quantum solution. According to the executive, “there are many players developing their quantum models, but there is no definitive one. That’s why we’re diversifying and looking at where it’s heading, because there will come a time when it’s differential”.

Can a date be predicted? Enrique Lizaso of Multiverse Computing believes that “in 10 years banks will not understand their operations without quantum computing”, while in the words of Escolástico Sánchez, “in two or three years we’ll be able to see glimpses of quantum benefits”.

Recent technological developments have allowed us to see that, whether in the short or long term, the future will bring a winning binomial from the hand of quantum computing and fintech solutions. As we wait to find out which type of computer we’ll all soon be using, we shall have to keep researching, exploring and innovating with technology.

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