From Theory to Practice: Quantum Research and Finance
Delivered at the Singapore FinTech Festival 2024, this session discussed the current state and future potential of quantum computing in the finance industry, touching on challenges and use cases of the future. It then delved into the role of sandbox environments for innovation, the integration of industry and academia, risk management challenges, and the potential for new cybersecurity threats.
1. Current and future state of quantum
- Quantum computing has the potential to automate tasks traditionally managed by classical AI and machine learning, expanding possibilities for use cases like pricing and anomaly detection in finance.
- Key areas where quantum computing could provide value include portfolio optimisation, where quantum algorithms may improve asset allocation decisions, and financial derivative pricing, where quantum methods could speed up Monte Carlo simulations.
- But present quantum devices are noisy and have low fidelity, limiting their ability to solve real-world finance problems at scale.
2. Preparing for quantum's impact
- Financial institutions, such as OCBC, are focusing on positioning themselves for quantum's arrival by preparing talent, collaborating with academic institutions, and working with ecosystem partners to explore potential applications.
- The financial sector needs to prepare not only by understanding quantum technology but also by creating business cases for its use in banking, ensuring readiness when the technology matures.
3. The role of sandboxes: Safe innovation
- A collaborative sandbox environment could help derisk the innovation process by allowing researchers and financial industry developers to experiment with quantum finance solutions, fostering safe and controlled development.
- A sandbox allows businesses to safely input models and data while protecting intellectual property. It is vital for experimenting with quantum algorithms and testing their real-world applications in a controlled environment.
4. Risk management and market regulation
- Quantum computing introduces both new risks and opportunities for financial and market stability. While quantum technologies have the potential to revolutionise risk simulations and market analysis, they also pose threats to existing cybersecurity models.
- One of the biggest risks involves quantum’s ability to break current encryption methods, which could leave data vulnerable to future decryption by adversaries. Financial institutions need to adopt quantum-resistant encryption methods like PQC (Post-Quantum Cryptography) and Quantum Key Distribution (QKD).
5. Quantum's role in cybersecurity
- Quantum computing poses a dual challenge in cybersecurity: while it can provide solutions like QKD to secure data, it also introduces vulnerabilities, particularly regarding the future decryption of encrypted data.
- Financial institutions and governments need to prioritise quantum-safe cybersecurity strategies to protect against potential quantum-enabled breaches.
Quantum computing holds exciting promise for revolutionising the financial industry. While practical applications are still in the early stages due to the noisy and limited nature of current quantum systems, the industry is preparing for future advancements. Collaboration between tech developers, financial institutions, and academia is essential to harness its full potential.
Speakers:
- Dr. Georgios Korpas, Senior Research Scientist, HSBC
- Mayda Lim, Managing Director, Head of Strategy & Business Management, OCBC
- Dr. Patrick Rebentrost, Principal Investigator, Centre for Quantum Technologies
Moderator:
- Dr. Chan Shu Ann, Programme Manager, Centre for Quantum Technologies