Your bank is already preparing for the quantum revolution – here's how

Hello, and welcome to?New?Scientist’s?Business?Insights?newsletter.

In May, hundreds of?business?executives and thought leaders met at an event hosted by?New?Scientist?in London to explore how the latest technologies will affect their industries. In the next few newsletters, we’ll share some of the innovations that were highlighted at the summit.

First up, we’re revealing how banks are looking to harness the power of quantum technology to prepare for the future.

Quantum of innovation

Philip Intallura, head of quantum technologies at HSBC, took to the stage at the New Scientist Emerging Technologies Summit to explain how the tech could be a game changer in the world of banking and beyond.

Quantum computers use the properties of quantum physics to store data and perform computations simultaneously, rather than individually as in classical computers. The potential value that could be realised by this technology is huge, Intallura explained. According to a McKinsey estimate , quantum computing could improve the value of four key industries – automotive, chemicals, financial services and life sciences – by $1.3 trillion by 2035.

?“That is an astronomical number,” said Intallura. “But what's even more interesting is when you look at the different industries that make up that number, the majority of it, 55 per cent, is attributed to financial services.”

?Given the potential of quantum computing to supercharge HSBC’s business, adopting the technology seems like a no-brainer. But there are additional things to consider when you’re in the financial services industry, said Intallura.

Safety first

Beyond the business benefits, quantum holds risks – namely, that the ability to perform computations simultaneously, rather than one by one, will mean that traditional methods of cryptography, which keep customers’ bank accounts and transactions safe, can be broken more easily than before.

HSBC, like many banks, uses the RSA 2048 encryption algorithm, which would take around a trillion hours of conventional computer processing to break. “It’s completely secure today,” said Intallura. “But a quantum computer comes along with enough power and enough stability, and you're talking a matter of days to break that same algorithm.”

It’s little wonder, then, that the bank is thinking about how to get ahead of the criminals. “Our view is we need to start that process – now,” Intallura told the audience. “We operate in 62 markets, we have 41 million customers, we process billions of payments worth trillions of dollars,” he said. “So the risks of not keeping our customers’ data safe are pretty tremendous."

Risks and rewards

The bank is working to develop quantum-safe cryptography that can withstand new quantum cryptography breakers, and using the technology in ways that can benefit the business’s bottom line. Among the use cases being explored by HSBC, according to Intallura, are deploying quantum computing to see how well it works in pricing and portfolio optimisation, fraud detection and producing more complex financial simulations.

Fraud detection was one of the areas where Intallura felt quantum could be most beneficial – in part because the complexity of handling different contributing factors is something quantum is uniquely positioned to help with.

“There's a very fine balance between stopping a transaction because you think it's fraudulent and disrupting customer journeys,” Intallura explained – for example, ?customers sometimes find their bank card blocked for buying a coffee on holiday in France. “You have to get that balance very, very carefully tuned. And so even a 1 or 2 per cent improvement in the precision of machine learning models would make a monumental difference in financial services.” It would not only keep customers happier, but could also keep them safer.

Technology in the wild

Saying you’re making a change is simple to do. Actually enacting it is trickier. However, Intallura explained that HSBC is already trialling quantum key distribution (QKD) – a method of sharing a random secret key known only to the recipient and sender, so as to securely encrypt and decrypt information – by sending it 60 kilometres between its head offices in London and its data centre in Slough.

That was just the beginning: the bank has also used the tech to execute a €30 million to dollar currency trade secured by keys transferred using QKD. “There was no difference in terms of the user experience, but we could execute that trade with the confidence that it's now completely resistant from quantum attacks,” he said – suggesting that it could be adopted more widely across the bank in the future.

The trials and tests are just that, Intallura said – trials and tests. But they’re done with a purpose. “Even if you’re very sceptical about quantum technology, and you think there’s a very slim chance it’ll materialise in the way we think it will, then the question to ask is: ‘What impact will it have on your business model? And what is the risk of not being prepared?’” That is why the bank is adopting quantum – and quickly.

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Chris Stokel-Walker