As large global banks test quantum computing uses, it’s crucial that what’s learned is shared with the broader industry, particularly when it comes to defending against cyber risks.
That’s according to Jan Bellens, global banking and capital markets sector leader at accounting and consulting firm EY. Top banks are leading the charge on exploring applications for quantum computing technology, which uses quantum bits, or qubits, to handle data processing at much faster speeds than regular computing, which uses binary digits, or bits.
Currently, “using quantum to fight quantum” is the most prominent banking application, since cyber risks are consistently top of mind for bank executives, said Bellens, who has worked with banking clients in 20 countries.
For now, the technology — still in its infancy — is expensive and difficult to access. But it holds the potential to speed up a number of processes in the financial services world, including in capital markets and payments. “It’s effectively an algorithm that allows much more efficient and much, much, much faster computing, because it seeks more efficient routes to solve problems,” Bellens told Banking Dive May 22.
Editor’s note: This interview has been edited for clarity and brevity.
BANKING DIVE: How are banks currently using quantum computing?
JAN BELLENS: The biggest one, at the moment, is actually more as a defensive tool. One of the reasons that banks were so quick to hire quantum computing talent is, effectively, because of the cyber risk that comes with quantum computing. One of the challenges is, if bad actors would have access to quantum computing capabilities, encryption tools that are currently being used in financial institutions pretty much around the world can quickly get decoded, because of the power and speed of quantum computing.
The first move by banks, when they hire quantum talent and when they want to understand the implications for their business, has to do with, how do I protect the bank against the cyber risk that comes from quantum computing? There are now emerging technologies — some are software-based, like rapidly changing passwords — that can effectively mitigate the risks that come from quantum.
What are other use cases for this?
With a lot of the use cases, there’s enough testing going on to make sure that error mitigation can be done. It’s very important for banks, especially, to make this error-free and to do sufficient testing to make sure that the use cases that are being run lead to the right outcomes.
Where quantum computing is most powerful is for driving huge sets of unstructured data very fast toward an outcome. Most cases being tested are in the complex space of capital markets; think derivatives pricing. Quantum computers can run Monte Carlo simulations [a computational algorithm that determines the range of possible outcomes in a certain scenario] at much faster and efficient speeds.
Another one would be portfolio optimization. Both for a bank's own trading book, and potentially for its clients — institutional investors or even high-net worth investors — if you look at the world of asset classes today, their historical returns, their future returns, their volatility in terms of standard deviations, etc., banks and capital markets providers are continuously running portfolio optimization models. Again, this is something a quantum computer can do much, much faster and with a much wider set of data, going back further in time, using more asset classes, and hopefully come to a better outcome.
Those two are the uses being tested the most. There’s others in payments, for risk optimization, that are certainly on the horizon, and being piloted and tested in months and years to come.
Big banks such as JPMorgan Chase and Wells Fargo are exploring the use of quantum computing, but what about smaller banks?
It’s really important to leverage all the efforts that have been made to protect the industry as a whole. Cyber is not a competitive issue. The industry getting together and more mature banks supporting the industry as a whole to ensure that it’s protected against this is absolutely critical. There’s a scarcity of great talent in this space; it’s not just about budgets or money. Certainly on protecting against the cyber risks, it’s really important to get that right.
Looking ahead, how should the industry be thinking about quantum computing use?
Like artificial intelligence and generative AI, it’s important to start experimenting with this. There’s disagreement on the timelines of when this will be commercially available; some say 2030 to 2035, others say we’ll see that happen in two to three years. It’s a trend that’s almost inevitable. Getting in early, trying to test this out and preparing some use cases in certain spaces would be a good strategy, because it will help build the muscle and understand what’s possible.
I would certainly encourage any industry roundtables, industry exchanges on cyber risk. It’s an industry challenge. Sharing what’s learned is important.
But this is also going to be an interesting competitive challenge. The expectation certainly is that leading banks that get use cases on the positive side right — for example, portfolio optimization — will have a competitive advantage. They will have a faster, better, broader view than others. It may be too early, but that’s probably something for strategy folks and regulators to think about. How do you think about that from a competitive perspective?
