What is quantum computing and how might it impact financial services?

Back in the early eighties, few could have predicted just how big of an impact the internet would eventually have on our lives. Then a little-known technology used mostly by government officials, even Robert Metcalf, one of its leading engineers, expected the web to “go spectacularly supernova and in 1996 catastrophically implode.”¹

This prediction, of course, did not play out. And today we face another, rapidly approaching and extremely powerful technology with the ability to drastically change our lives – infinitely more powerful than the web, it has left some optimistic and others cautious. I’m talking about quantum computing.

A quantum computer is an incredibly complex machine that offers seemingly endless possibilities. On the one hand, it has the potential to change the way we live and work for the better. But the power of these machines could also be used to undermine one of the key security structures that systems like the internet rely on.

Here at Lloyds Banking Group, our aim is to cut through the noise and separate hype from reality – to look at the evidence and evaluate how new technologies can be used to enhance the lives of our customers and colleagues. With that in mind, here’s a run-down of quantum computing, and how it might impact financial services.

What is quantum computing?

The subject of quantum mechanics has featured in both sci-fi novels and respected academic papers for the best part of one hundred years. It wasn’t until the 1980s and the advancement of the internet, though, that scientists started to look seriously at computers that could use quantum mechanics to process data and execute code.

The idea was that these quantum computers might one day enable us to process large, complex, multi-variable problems previously considered impossible within a human lifetime, and allow us to find solutions to intractable problems.

The primary difference between quantum computers and the classical computers we use today, is that the latter process data in units of zeros and ones using ‘bits.’ Quantum computers, on the other hand, process data using ‘qubits’ which can be zero or one, and everything in between, all at the same time.

If that sounds complicated, think of it like this: back in 2015 you may remember a certain dress circulating around the internet. To some the dress was blue but to others it was green. Now, to the observer both of these answers were correct at the same time.

It was only when the owner revealed that the dress was actually blue and black that the observer got a definitive answer. It’s the same principle for quantum computing; a qubit can represent multiple options at the same time on the journey to a definitive answer. This ability, known as superposition, is the key that enables quantum computers to operate differently to classical computers.

As impressive as that sounds a single qubit only represents a single variable. To solve multi-variable problems, you need many qubits to represent many variables. Linking qubits together is called entanglement, and means that a change in one qubit is automatically reflected in the other connected qubits. This enables what’s known as exponential scale of processing. For example, Google's new quantum chip Willow, can perform complex calculations in minutes that would take the world's largest supercomputer 10 septillion years, potentially revolutionizing fields like AI, medicine, and energy.²

But with these entangled qubits all connected, you still need to find an answer to the problem you are trying to solve and this is where inference comes into play. Inference amplifies or cancels out potential combinations or probabilities to help reveal the desired answer.

It’s important to note that quantum computers are not going to replace all classical computers. There are tasks that existing computers will always be better at, and so deploying a quantum computer wouldn’t be the right decision but for certain tasks, they may well be the best tool in the toolbox.

What are the advantages and risks associated with quantum computing?

Quantum computing has the potential to solve problems that today we think of as unsolvable. The development of new pharmaceuticals and materials, efficiency of complex systems such as supply chains and energy distribution, and machine learning models could all see transformational impacts as a result of quantum computing. But there are downsides to using the technology too.

For example, qubits are extremely sensitive to external factors such as temperature, sound and physical movements which would cause them to decay, and errors to occur within the computations.

This is why today’s quantum computers are incredibly complex pieces of engineering. Most operate at very low temperatures and in vacuum environments to minimise these external factors and maximise performance of the machines.

But even with all this complex engineering, today’s quantum computers are not yet able to outperform classical computers. Major technology companies and startups are experimenting with different approaches to create and control qubits to reduce the risk of errors, and increase the scale of calculations that can be performed.

The complexity isn’t just limited to the actual machines themselves. How software engineers interact with and develop for quantum computing will be very different to their experience of software development today. Knowledge of information technology will need to be coupled with mathematics and physics to successfully leverage quantum computers, and so the journey to adoption will include new skills and training efforts to upskill our colleagues.

How might quantum computing be used in financial services?

From complex system modelling to working alongside classical algorithms to improve accuracy, there are a myriad of ways that quantum could be harnessed to improve financial services. A key strength of the technology however, lies in it's ability to assess large, multi-variable data sets.  

Thanks to the unique properties of qubits, such as superposition which allows them to represent multiple states at once, quantum computers can process and compare vast, multi-dimensional datasets simultaneously. This enables them to uncover subtle relationships within data sets far faster and more efficiently, opening the door to transformative applications across banking.

How is quantum computing helping to protect customers against fraud? 

At Lloyds Banking Group, we’re exploring how quantum computing can be harnessed to strengthen our defences against fraud. In partnership with IBM, we’re running an experiment to understand how quantum algorithms could detect fraudulent activity more quickly and accurately than ever before. By analysing complex patterns in transaction data, quantum computing has the potential to spot subtle anomalies that might be missed by classical systems.  

This experiment is an important step in our ongoing commitment to safeguarding our customers, and we look forward to sharing more as our work with IBM progresses in the coming months.