Quantum Computing in Finance: Findings from the Deloitte FSI Predictions 2023 Report

As discussed in Deloitte’s FSI Predictions 2023 Report, the financial services industry is on the brink of a quantum revolution. As the age of quantum computing rapidly approaches, increased investments and patent filings in quantum hardware technology are clear indicators that spending on quantum-related capabilities is set to soar in the coming years. According to estimates, the global financial services industry’s spending on quantum computing is expected to grow a staggering 233 times from $80 million in 2022 to $19 billion in 2032, at a 10-year CAGR of 72%. This exponential growth presents a unique opportunity for firms that are proactive in developing quantum capabilities. 

Quantum computing promises to revolutionize computational capabilities, particularly for complex mathematical operations crucial to the financial industry, such as financial simulations and modeling. However, it also brings a significant cybersecurity risk. Quantum computers could potentially execute algorithms like Shor’s algorithm, developed in 1994, which could render much of today’s cryptography obsolete. While the timeline for such attacks remains uncertain, the urgency to address this cybersecurity threat is immediate.

On the software and services front, quantum computing adoption is being driven by the increasing demand for quantum-resistant cybersecurity solutions and the collaboration of entrepreneurial firms offering comprehensive cybersecurity services. This collaborative effort aims to harness emerging technologies while mitigating associated risks.

As technology advances and vulnerabilities grow, the adoption of quantum computing-focused technologies is expected to surge. However, before firms can capitalize on the benefits of quantum computing, they must first play defense against the looming cybersecurity threats.

Over the next few years, defensive spending in the financial services industry will primarily focus on mitigating quantum-powered cyberattacks. With vast amounts of sensitive data and financial transactions at stake, financial institutions are prime targets for quantum computer cyberattacks. Industry experts caution that quantum computers, once commercially available in the near future, could potentially break public key encryptions, which secure 90% of global encrypted data. The consequences of a successful attack on financial systems could be catastrophic.

To counter these threats, some firms are already preparing with the development of Postquantum Cryptography (PQC) techniques. As the Walacor team shared with the Deloitte report authors, PQC represents a new wave of quantum-resistant cybersecurity methods designed to safeguard data and transactions in the quantum era. One innovative approach uses blockchain technology to encrypt data at the record level with hardware-enhanced, quantum-resistant keys. This secures data within the perimeter and ensures the immutability and traceability of administrative records.

The National Institute of Standards and Technology is expected to finalize and publish postquantum cryptographic standards by 2024. This could pave the way for regulatory requirements regarding quantum-resistant cryptography in the financial services sector, necessitating significant investments in hardware, software, communications, and infrastructure upgrades.

While defensive measures are critical, financial services firms are also exploring quantum computing for offensive use cases. These include Monte Carlo simulations, portfolio optimization, risk management, and complex derivative calculations. Quantum computers may also enhance AI capabilities for data analysis, enabling firms to predict customer needs in near real-time and improve the overall customer experience.

Although full-scale quantum computers are not yet commercially available as of mid-2023, some forward-thinking firms have already begun investing in quantum technologies like quantum annealers for specific use cases. These early adopters are positioning themselves to transition to more powerful quantum hardware when it becomes available.

Embracing quantum computing requires specialized expertise distinct from traditional IT systems. As a result, leading financial institutions, including Goldman Sachs, JPMorgan Chase, HSBC, and Barclays, have established teams to identify problems that quantum computing can solve and develop effective programming solutions.

The financial services industry is at a pivotal moment in its history as quantum computing looms on the horizon. Firms that strike a balance between defense and offense, preparing for quantum-powered cybersecurity threats while exploring the potential of quantum computing, stand to gain a significant competitive advantage. The quantum revolution is coming, and proactive action is the key to thriving in this new era.

Check out the full PSI Predictions 2023 Report for more details. For more information about PQC techniques and securing your organization’s data, schedule your call with Walacor today

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