How Will Quantum Computing Help Banks?

The nascent field of quantum computing can aid banks in risk assessment, and JPMorgan Chase is partnering with IBM to find out how.

The buzz around quantum computing isn’t letting up. For years, technology leaders in banking have been interested in the technology, but that interest is now transforming into involvement in the field.

In December, IBM announced a series of partnerships with major corporations, academic institutions and national research labs in order to explore practical implications of the cutting-edge tech. JPMorgan Chase signed on to explore how the tech could be used in financial services.

Quantum computing could unlock new opportunities for banks in risk assessment and trading, allowing them to make computations much faster than existing computing power allows for.

JPMorgan Chase joined the IBM Q Network, a collaboration of leading Fortune 500 companies, academic institutions and national research labs working directly with IBM to advance quantum computing.

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What Is Quantum Computing?

Major tech companies, including MicrosoftGoogle, IBM and Intel are investing in quantum computing. So, what is it?

As FedTech reported in 2016:

Quantum computing harnesses the laws of quantum mechanics to carry out complex data operations. While traditional computers use bits (represented as either binary 1s or 0s), quantum computing harnesses quantum bits, known as qubits. These can be read as 1s, 0s, or both, providing exponential computing power over traditional computers by creating shortcuts in the computing process.

In theory, quantum computing represents a major leap forward in computing power. However, it will likely be years before it is widely used in business applications. That’s because, as The Wall Street Journal reports, “Commercializing the technology is a complex task in part because qubits can’t yet maintain their quantum mechanical state for very long and they’re delicate and easily disrupted by changes in temperature, noise and frequency.”

How Will JPMorgan Chase Use Quantum Computing?

JPMorgan Chase, along with companies such as Samsung, Daimler AG and chemical and materials firm JSR Corporation, will get direct cloud-based access to IBM Q systems to perform corporate experiments.

According to IBM, JP Morgan Chase will explore how quantum computing can be used for trading strategies, portfolio optimization, asset pricing and risk analysis. Yet it will take some time to accomplish this, since Fortune reports that “the software that currently underlies these kind of financial tasks must be ‘mapped’ to work on IBM’s quantum machines, a laborious and experimental task.”

“As a leader in financial services technology, JPMorgan Chase is excited to collaborate with IBM Research in exploring how quantum computing may impact the industry,” JPMorgan Chase CIO Lori Beer says in a statement. “Joining the IBM Q Network allows us to bring our technologists alongside IBM’s researchers and leverage cutting-edge quantum systems to learn about how we may be able to apply these technologies in the future.”

Beer tells the Journal that “it’s too early to say what might be possible,” with quantum computing. However, the newspaper reports that the bank thinks the technology “could provide exponentially more computing power for solving certain types of problems that require the use of complex algorithmic models to determine a likely outcome.”

That ranges from improved risk analysis and assessments to predicting how portfolios will perform on varying circumstances or identifying which products a company should trade to get their desired outcome, the Journal reports.

Quantum Computing May Pose Security Risks

Banks love the idea of quantum computing because the faster a bank can compute a transaction or make a decision, the more profitable it is likely to be. “Financial services is a data-rich environment,” Kevin Hanley, head of innovation at the Royal Bank of Scotland, told BBC News in 2016. “Time is money and the ability to process data fast could have a huge potential benefit for our customers.”

However, there are also security risks associated with quantum computing. Rep. Will Hurd, chairman of the IT subcommittee of the House Oversight and Government Reform Committee, writes in a December 2017 op-ed in Wired that the same processing power that makes quantum computing so attractive to banks and researchers alike “can be used to unlock different kinds of secrets — from your personal financial or health records, to corporate research projects and classified government intelligence.”

Many countries, including China, are investing heavily in research and development into quantum computing, Hurd notes, meaning “the world is likely less than a decade away from the day when a nation-state could use quantum computers to render many of today’s most sophisticated encryption systems useless.”

Hurd says: “From academics to the National Security Agency, there is widespread agreement that quantum computers will rock current security protocols that protect global financial markets and the inner workings of government.”

IT security professional Graeme Park says in SC Magazine UK that quantum computing could potentially be used “to break the fundamental encryption systems that keep data secure and ultimately govern our safety.”

Park adds: “While this is undoubtedly more of an issue for national security, if communications around business that your organization is doing today could still have commercial value in 10 to 15 years’ time, then this potential threat should be on your radar too.”

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Jan 18 2018