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

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.

There are tasks that existing computers will always be better at, and so deploying a quantum computer wouldn’t always be the right decision. But for certain tasks, quantum computers will 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 online banking, to the introduction of mobile apps, managing your finances became more convenient than ever before.³ Today, financial services embraces digital analytics to better understand customer needs and create better outcomes. And looking ahead the coming age of quantum computing truly has the potential to bring about transformational change.

There are a myriad of ways that quantum computing could be used to improve financial services – from modelling complex systems to better predict future events, assessing large, multi-variable data sets to determine the optimal answer to a given query or developing quantum machine learning algorithms working side by side with classical algorithms to improve the accuracy of the models.

"Today, financial services embrace digital analytics to better understand customer needs and create better outcomes. And looking ahead, the coming age of quantum computing will  bring about an even greater change." 

Will quantum computers break the internet?

Another key capability of a quantum computer is factorisation, or the process of finding factors of large numbers.

But what does factorisation have to do with breaking the internet? Well, the public key encryption technologies used today to store and transit data across the web, like RSA and ECC, are based on asymmetric encryption approaches which use incredibly difficult mathematical problems to prevent someone other than the intended recipient from decrypting the data.

The world has relied on the fact that no computer is powerful enough to solve these hard mathematical problems and so our data flows around the internet safely. However, in 1994 Peter Shor developed an algorithm that, with a powerful enough quantum computer, could undermine the security of all this data.

And this threat doesn’t just become an issue at the point when a powerful enough quantum computer is built. There is also the risk that valuable data will be stolen today, stored by bad actors waiting for the right quantum computer to be built at which point they can reveal the sensitive data.

Whilst this might seem like a strange technique, particularly as the payoff is potentially many years away, there is sensitive data like medical or financial records that would still be very valuable, even in five to ten years. This is commonly referred to as the ‘Harvest Now, Decrypt Later’ risk, and it’s pushing organisations to move to quantum safe encryption sooner, rather than later.

Earlier this year, the National Institute of Standards & Technology (NIST) ratified several post quantum encryption standards and recommended organisations like Lloyds Banking Group begin transitioning to the new standards, as soon as possible.

The Group has started this journey with our strategic security partners collaborating across government, industry, academia, investors and startups. Through 2025 we plan on initiating a crypto modernisation programme to fully understand our current needs and capabilities, develop a target technology, operating, and governance model, and define delivery method for delivery of target state.

What’s next?

Over the last decade, progress in quantum computing has accelerated rapidly. Now, experts predict that these powerful machines are between five and ten years away from hitting the mainstream. But given the opportunities quantum computers could bring, it’s imperative that organisations across the board continue to build their understanding of quantum computing, as well as be prepared to experiment with quantum computing algorithms.

As one of Britain’s largest financial service providers, we want to harness the power of emerging technologies such as quantum computing in a way that serves both our customers, and our colleagues - ensuring we are prepired for the futrue and in the best position to help Britain prosper.