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Quantum Computing In financial services
Financial services has a history of successfully applying physics to help solve its thorniest problems. The Black-Scholes-Merton model, for example, uses the concept of Brownian motion to price financial instruments – like European call options – over time.

Applying emerging quantum technology to financial problems—particularly those dealing with uncertainty and constrained optimization—should also prove hugely advantageous for first movers. Imagine being able to make calculations that reveal dynamic arbitrage possibilities that competitors are unable to see. Beyond that, greater compliance, employing behavioral data to enhance customer engagement, and faster reaction to market volatility are some of the specific benefits we expect quantum computing to deliver.

What gives quantum computing this enormous advantage? The solution space of a quantum computer is orders of magnitude larger than traditional computers—even immensely powerful ones. That’s because doubling the power of a classical computer requires about double the number of transistors working on a problem. The power of a quantum computer can be approximately doubled each time only one qubit is added.

While broad commercial applications may remain several years away, quantum computing is expected to produce breakthrough products and services likely to successfully solve very specific business problems within three-to-five years.

Quantum computing can also enable financial services organizations to re-engineer operational processes, such as:

– Front-office and back-office decisions on client management for “know your customer,” credit origination, and onboarding,

– Treasury management, trading and asset management,

– Business optimization, including risk management and compliance.

Quantum computing’s specific use cases for financial services can be classified into three main categories: targeting and prediction, trading optimization, and risk profiling.

We explore potential use cases in each of these categories, providing examples that apply to three main industries in financial services: banking, financial markets, and insurance.

Powerful quantum use cases

Quantum computing’s specific use cases for financial services can be classified into three main categories: targeting and prediction, trading optimization, and risk profiling.

Quantum computing will begin significantly transforming the financial services landscape over the next five years. Financial institutions that adopt quantum early can seize major competitive advantages, including the potential to leapfrog competitors to become market leaders. So, what steps should financial services institutions take today to begin exploring quantum computing?

1. Appoint and charge quantum champions in your organization to experiment with actual quantum computers and explore the potential applications of quantum computing for your industry.

2. Test quantum algorithms to understand their potential advantages and evaluate how they may impact your business. For example, an artificial intelligence classifier and an option-pricing finance simulator are already available.

3. Consider partnering with like-minded institutions, providers, application developers, and coders, startups with supporting technologies, and organizations with similar challenges to gain end-to-end access to an entire quantum computing ecosystem.