Quantumisation in Fintech !
The Finance technology has advanced over the few years with developments in various aspects like that in computer processing. There have been a lot of complex problems and challenges dealt by finance industry in bringing out some innovation and one of them is QUANTUM TECHNOLOGY. Quantum computing is a field where computers make use of a quantum-mechanical phenomenon that allows data to be represented as “Qubits”.
Now let’s see what exactly is QUANTUM COMPUTING?
As mentioned above it is a field which applies theories developed under quantum mechanics to solve problems. It uses Qubits which are not constrained to only binary values 0 and 1 but instead uses a combination of 0 and 1 simultaneously due to their flexible nature. The set of Qubits represents exponentially bigger and more values than their binary counterparts which allow the interaction and delivery of algo at several rates faster than the conventional one.
Let’s understand with this metaphoric example –
We all are familiar with MARVEL’S X-Men movies, right?
So let’s assume Fintech as Marvel’s X-Men, where quantum computing is the shape changer Mystique, big data and block chain are Xavier’s Cerebro and Bitcoin is the disruptive Wolverine.
Some facts to know:
- According to Atos, Gurgaon, “Quantum technology will provide greater accuracy in simulating customer purchasing preferences based on demographic data, whether that’s for an insurance policy or a mortgage. Customer personal information, meanwhile, can be protected more effectively through simultaneous automation and analytics of pending threats.”
- Practical quantum algorithms are on the verge of development which help in the analysis of Risk easy. This algorithm system will be used to evaluate better pricing of financial derivatives.
- According to Bloomberg, Google’s most advanced quantum computer named Sycamore could solve a specific computational task that a traditional supercomputer takes 10,000 years to solve within 3 minutes.
EXAMPLES OF QUANTUM COMPUTING APPLICATIONS AND THEIR IMPLICATIONS ON FINANCIAL SERVICES
- Quantum Cryptography – It is the use of laws of quantum physics to perform cryptographic functionalities. By this, the information is concealed. One cannot read data encoded in quantum states because they shapeshift by changing states and as such prevent eavesdropping, in addition to other techniques hackers may attempt.
- Quantum Block chain – This will be a catalyst for block chain as it will help in coding and decoding of the information which will be safe, which is explained as below –
- Quantum Transactions – Quantum technology’s ability to handle billions of transactions per second will be a welcome addition to banking institutions which are constantly overloaded with huge volumes of transactions.
- Quantum Data – Quantum computers with enough qubits will be able to analyze all of the world’s information almost instantaneously.
IMPACT OF QUANTUM IN BANKING
- Portfolio Analysis – Identification of most attractive portfolios.
- Fraud Detection – Help in quick and accurate identification of fraud indicators to enable risk management.
- Asset Valuation- Performance of risk analysis by uncovering intelligence and processing lighting speed.
- High Frequency Trading – Help in buy-sell strategies with extremely quick execution.
The impact of quantum computing on the financial sector will predominantly be a good thing. This field is developing at a striking rate surpassing all expectations, and partly due to conceptual leaps, which promise gigantic speedups for widely applicable algorithms. It is my belief that quantum computers will play a key role in quantitative finance.
Palak Bhatnagar is a student , pursuing PGDM in Finance and Business Analytics at New Delhi Institute of Management , New Delhi . She is a finance enthusiast , a versatile person who likes to explore . She is a keen learner with an objective to learn and grow.