Market intelligence 2.0: Beyond competitors, clients and products.
The financial services industry is increasingly being driven by new technologies – to stay competitive, you need sound insight regarding the opportunities and risks these present.
Early warning: Quantum computing and the next generation of banking disruptors
The wave of fintech
disruption that is transforming the financial services
industry has compelled nearly every financial institution to adopt or invest in a plethora of technologies such as artificial intelligence, APIs, data analytics, process automation and blockchain, or risk becoming obsolete.
Although still in an embryonic stage, the appearance of quantum computing has the potential to transform several industries including financial services with powerful real-world applications that far exceed what is possible with current technology.
What is quantum computing?
Unlike a classical computer, a quantum computer harnesses the power of quantum mechanics. While a classical computer uses a binary bit, which can be 0 or 1, a quantum computer uses what are called Qubits (short for quantum bits) which can store 0 or 1 or both 0 and 1 at the same time.
This means a quantum computer can operate 100,000 times faster and store far more data than classical computers and have the potential to change the way we work and live.
Algorithms have already been created which can run on quantum computers but engineering a machine that can utilize the power of quantum mechanics has yet to be successfully deployed. Further development depends on solving key challenges such as smaller atomic clocks and for more robust Qubits for quantum computing.
What’s next: Four Trends to Watch
More rapid development of this disruptive technology: Governments and tech giants are investing considerable amounts of money and time to overcome barriers of building a full-scale quantum computer and making it main-stream.
Regional leadership: The United States and China are leading the race to bring quantum computing innovation to market.
- IBM is spending millions on research and has recently announced a 50-qubit computer. They have also made a 20-qubit system available through its Quantum Computing Network and Cloud Platform.
- Google is spending millions on research to achieve “Quantum Supremacy,” the point at which a quantum computer can do calculations beyond the reach of today’s fastest supercomputers.
- In 2016, the European Union announced that it will launch a $1 Billion Quantum Technologies program. The initiative is a key part of the EU data and computing Infrastructure.
- China has created a satellite and ground based quantum key distribution network and in 2017, demonstrated communication transmitted images and videoconferencing.
First financial services use cases: Banks and other financial firms are focused on leveraging quantum computing technology for investments, portfolio management and simulations.
- Patent applications for quantum technologies have originated from many countries, but China and the U.S. are on top of the list for total applications.
- Patent applications are focused in three areas: quantum computing, quantum sensors and quantum cryptography.
Cybersecurity applications: Financial services businesses are seeking an “un-hackable” way to send information using quantum key distribution and quantum safe encryption.
- Hedge funds appear to be mostly interested in quantum computing to help minimize risk and maximize gains from dynamic portfolios of instruments.
- Morgan Stanley hopes to speed portfolio optimizations like Monte Carlo simulations with the help of quantum computing.
- Barclays and JP Morgan Chase are experimenting with IBM's quantum computing technology since they joined Q network in late 2017.
- Commonwealth Bank in Australia is building a Quantum Computing ecosystem that involves software, hardware and a simulator. They have partnered with a Washington DC company QxBranch.
- In the U.K., NatWest is using quantum-inspired computing power, to execute tasks at 300 times the speed of a traditional computer, which means that quantum algorithms are used, but not qubits. The quantum-inspired computing power can be used to help portfolio managers decide on the right composition for the bank's high-quality liquid assets (HQLAs) portfolio.
- Some banks are experimenting with quantum safe encryption that allows computations and querying of encrypted data and also provides long-term security against quantum computers which can break current encryption.
Market intelligence delivers the competitive edge
Sophisticated organizations are increasingly looking at what’s over the horizon of their competitive landscape, as opposed to the traditional tactical monitoring of competitors, clients, and mentions of their own organization. This can mean different things to different organizations, but a few examples include regularly assessing new entrants, potential regulatory developments, or in this case disruptive technologies.
Connect with us on LinkedIn for more updates about wealth management and the wider market intelligence industry.