Which existing markets will disrupt quantum computing?
Traditional computers that only use 1 and 0 for all arithmetic operations have revolutionized our world in many ways. Today, however, new types of quantum computers have the potential to fundamentally change the use of computers again: There is often talk of a threat or even the end of digital data encryption, but also of miracle machines that can perform selected calculations several orders of magnitude faster than all of them before supercomputer that was there. Half-knowledge, myths and falsehoods surround the new technology, which so far only works under laboratory conditions - and freezing temperatures of minus 273 degrees Celsius.
What implications would the market readiness of quantum computers have for the financial industry, in which data encryption is of central importance, but at the same time unprecedented computing power would also bring advantages?
What makes a quantum computer?
To understand why the quantum computer is said to have such groundbreaking potential, it is worth looking first at the traditional computer, at its smallest functional units, the transistors. Put simply, these are nothing more than switches that can only have the value 0 or 1 at any point in time - they can be off or on. This information is known as a bit - the smallest possible unit of information currently available on computers. Various arithmetic operations and data storage are carried out via the two states 0 or 1 and the combination of several bits.
Modern computers have billions of such bits and can use them to map a large number of possible states. Even if very quickly, the processing steps are carried out strictly sequentially and deterministically. As a result, classic computers cannot efficiently solve some problems, such as simulating large molecules or deciphering encryption.
Information storage is solved quite differently by quantum computers: The quantum analogy to the bit, the “qubit”, is characterized by the fact that it carries both the information value “0” and “1” at the same time - as long as it is not observed. Physicists speak of the so-called superposition here. If a large number of these qubits are linked with one another, the number of possible states that the system can map and process at the same time increases exponentially. This makes it possible to carry out a large number of arithmetic operations in parallel, and the speed with which a quantum computer can carry out even the most complex calculations increases enormously.
The end of digital data encryption?
Due to the properties described above, quantum computers are suitable for solving complex problems (see graphic below). Last but not least, they also pose a threat to electronic encryption. For the financial sector alone, this makes the issue more explosive. In order to be able to identify the origin of the partly apocalyptic claims about this, one should first look at how current cryptographic methods work.
Current encryption techniques are based on the fact that the prime factorization of very long series of numbers cannot be efficiently solved by conventional computers; even today's supercomputers would quickly need several thousand years for this task. However, due to the superposition, quantum computers can carry out several calculations at the same time and thus decipher currently used data encryptions in a matter of seconds. Promising research is being carried out on quantum-solid cryptography - also in Germany - so that it can be assumed that secure encryption methods are also available with quantum computers.
Quantum computers with potential for use cases in banking
If the exponentially higher computing capacity enables quantum computers on the one hand to decrypt common data encryptions, on the other hand the technology is suitable for tasks from all areas that work with enormous amounts of data and complex models. Due to the further development of the methods in the last few years up to artificial intelligence (AI) and big data analyzes, there is an increased demand for computing power, which one could meet by using quantum computers.
However, the financial industry does not have to wait for the quantum computer with its applications: there is no doubt that many areas of application can be identified that would benefit from the increased computing power that a quantum computer offers. For example, models for portfolio optimization, risk management and investment evaluation could be improved and accelerated. Quantum-improved machine learning processes offer great potential not only in fraud detection, but also to strengthen customer centricity. For example, product recommendations could be further personalized.
But banks can already make significant advances in all of these areas with the help of cloud computing. Cloud computing offers a significant increase in computing power and the possibility of efficient parallelization of complex calculations.
Not yet a dominant approach
In theory, quantum computers hold enormous potential - not only in terms of conceivable use cases, but also in the form of a threat to existing data encryption. In fact, we are currently still doing basic physical research on quantum computers. There is currently no dominant approach to implementing the technology. External influences, such as even minor heat fluctuations, disrupt the highly sensitive qubits, so that the memory is not yet stable for a period longer than a single-digit second range. Quantum computers are still extremely error-prone. In order to produce reliable results, current quantum computers would have to be expanded by a large number of "correcting" qubits.
The relevance of the technology for banks and financial service providers is linked to a significant increase in market maturity and the commercial usability of quantum computers. A paper published a few months ago by Google, in which “Quantum Supremacy” is mentioned, and the associated media turmoil underline the explosiveness of the topic. According to this, Google is said to have provided evidence of the superiority of quantum computers over today's binary supercomputers - their quantum computer solved a specific arithmetic task in a little more than three minutes, for which the currently most powerful classic computer would need around 10,000 years.
Ultimately, however, this paper also shows how far the way to a commercially usable quantum computer still is. Estimates of when this will be available continue to vary widely. If one takes into account all the current challenges in the practical implementation and further development of the technology, it can be assumed that this can be expected in ten years at the earliest. It should also be emphasized that even after they are ready for the market, quantum computers will not replace traditional computers, but will only supplement them in calculations and simulations in which their use offers a real advantage over traditional computers.
Against the background of possible effects on data encryption, banks should already become aware of the possible challenges and implications of future sophisticated quantum computers. The best strategy for dealing with quantum computers is for the time being: wait and see instead of doing your own basic research - nevertheless check IT infrastructures and make them fit for future encryption standards.
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