Just before Christmas in what was described as a “world-first” HSBC, one of the largest banking and financial services organizations, used quantum protection for AI-powered foreign exchange trading. The trial involved safeguarding a €30 million trading scenario from euros to U.S. Dollars.
“By investing and experimenting in quantum technologies now HSBC is not just preparing for the future; we’re shaping it,” Colin Bell, CEO of HSBC Bank and HSBC Europe, said in a statement.
HSBC is one of a number of banks helping pioneer tech solutions that combine AI and quantum or AQ for short. Shoring up cybersecurity is a key reason, but it is not the only one. Combining the two technologies can improve business outcomes across a broad spectrum of industries from financial services and healthcare to aerospace and manufacturing, say industry experts.
Using AQ now can also be a hedge against the day that fault-tolerant quantum computers become a reality. Since quantum computing is a step-change technology with substantial barriers to adoption industry pundits say early movers will seize a large share of the total value, while those who have not prepared may not be able to catch up and could see their businesses wiped out overnight.
That prospect is so worrying that a new acronym cropped up during the World Economic Forum’s annual meeting in Davos in January, says Clement Jeanjean, a Paris-based senior director at SandboxAQ, a company spun out from Google parent Alphabet that delivers AQ solutions that run on today’s classical computing platforms. “Instead of FOMO [Fear of Missing Out] people were talking about FOBO: Fear of Becoming Obsolete,” he says. “There is a race to make sure that historical incumbents in industry verticals are not put out of business overnight.”
There was also concern in Davos about not just companies but countries falling dramatically behind. “The growing global quantum divide between countries with established quantum technology programs and those without will lead to significant imbalances in core areas such as healthcare, finance, manufacturing and more,” according to the Quantum Economy Blueprint report published by the World Economic Forum on January 16, during the annual meeting.
Current worldwide public sector investments in quantum computing exceed $40 billion, says the report. But only 24 out of the 193 member states of the United Nations have some form of national initiative or strategy to support quantum technology development.
“We do not want to risk a quantum divide and hope the blueprint will enable discussions for different regions to participate and benefit from the quantum economy,” says Arunima Sarkar, the Forum’s Lead, Quantum Technologies. “We look forward to piloting the blueprint, working with policymakers in developing regional and national roadmaps for leveraging the potential of this technology and preparing for the transition to the post-quantum era.”
The Forum takes a much wider view of quantum technologies, including not just computing but also sensing and communications, says Sarkar. “Some of these technologies are already being deployed while for others we see rapid advancements,” she says. “Eventually these technologies are expected to permeate every sector of society, creating what we call the Quantum Economy.”
Boosting Financial Services
Quantum technology taps into the unusual behavior of atomic and sub-atomic particles to perform far more complex calculations at a massively increased speed compared to today’s computers. The hope is that this could lead to breakthroughs in drug discovery and previously unsolvable problems as well as solutions that have the potential to generate higher returns for business. Although fault-tolerant quantum computing hardware is still some time away, there are many aspects of quantum physics and technology that can be commercialized in the near term with no need for quantum computers.
For example, today’s accelerated hardware, such as NVIDIA’s graphics processing units (GPUS) can pair together quantum inspired computing algorithms with AI to unlock business value for financial institutions, says an article co-authored by HSBC’s Bell and SandboxAQ CEO Jack Hidary published on The World Economic Forum’s site. The article lists potential benefits as:
Risk Mitigation: Applying quantum-inspired algorithms and AI can accelerate the evaluation of market conditions and portfolio risks,” These tools can “simulate many more dimensions that Monte Carlo tools” – the traditional sampling used in algorithmic decision-making,” says the article. The outcome – more comprehensive risk assessments- is expected to lead to better decision making and risk management.
Portfolio Optimization: Quantum-inspired algorithms can help financial experts optimize diversification and asset allocation, enhancing the performance and stability of portfolio, leading to better returns and risk management, says the article.
Fraud detection: Quantum machine learning models can improve learning quality to capture criminal or fraudulent transactions better, leading to better protection for customers and their assets and reduced operational risk for financial institutions.
The combination of AI and quantum allows financial services institutions to work on all dimensions of complex problems at the same time to get more accurate forecasts,” SandboxAQ’s Jeanjean, who is working with banks adopting AQ, said in an interview with The Innovator.
AQ can additionally add value for large banks that sell a variety of products to tens of millions of customers he says “It is very difficult today to understand what kind of cross selling they could do with these customers without the power of AQ,” he says. “Typically the way banks use AI today is with the use of chatbots. This can lead to efficiency gains but is not unlocking ways for banks to optimize their product portfolios and to do upselling or cross-selling and bring in extra revenue. AQ will allow them to go far beyond what they are doing today.”
Speeding Up Drug Discovery
Drug discovery is another area where AQ is expected to have a big impact. For example, French biotech firm Aqemia, which announced that it had closed a €60 million series A round of venture capital on January 30, is using AQ to accelerate the discovery and design of molecules that have the potential to become drugs that fight different diseases.
The company says it is differentiation lies in applying its unique quantum and statistical mechanics algorithms to generative AI to design novel drug candidates. When prompted to create a molecule that can address a certain target, the technology proposes millions of possible candidates. The company then applies the quantum-inspired algorithms it developed, which excel at simulation problems, to test the millions of candidates produced by the model. Those that have the most potential are fed back to the AI model. With every feedback loop, the model’s answers become more efficient and targeted.
AQEMIA said it will use the funding to accelerate the growth of its wholly-owned pipeline of drug discovery projects and assets as well as further scale its proprietary GenAI and deep physics drug discovery platform. This new investment follows recent successes in drug discovery projects led by Aqemia involving the entire drug discovery value chain, including a recent $140 million drug discovery deal with global pharmaceutical company Sanofi.
For all of its potential benefits quantum computing comes with challenges. Quantum computing could render most current encryption schemes obsolete, threatening consumer protections and the integrity of digital infrastructures and economies. “The severity of these risks, combined with an uncertain timeline to transition to new security models, requires stakeholders to take proactive measures,” says a January Forum report on Quantum Security For The Financial Sector.
“The risk is not that current modes of encryption will be broken next year,” says SandboxAQ’s Jeanjean. “It is very unlikely.” And, even if bad actors steal data now to decrypt later, a there is little value in out-of-date financial information, he says. “The real risk is that whenever this happens, companies aren’t ready. This could mean life or death for a bank or any critical business. The risk of being put out of business is huge. Your operations could be disrupted. If you are a clearing house that handles $5 trillion of transactions a day and someone manages to change 50 transactions and create a doubt about the ledger at the end of the day this could cause chaos in financial markets. So, what we are doing with banks is building capability inside their IT structure to migrate when they need to do it. It won’t be about just one migration but several. It is a multi-year process and requires dedicated people working on this full-time.”
That is why HSBC, which processed 4.5 billion payments for its customer last year, worth an estimated £ 3.5 trillion, says it is being proactive.
HSBC says its quantum scientists, cyber-crime experts and trading specialists plan to use the insights generated by its experiment of applying quantum security to the AI-powered foreign exchange to understand how Quantum Key Distribution can be integrated into the bank’s key trading tools. “Successfully pioneering quantum protection for our FX trading is a significant step with far-reaching implications for the blueprint of our future cybersecurity,” HSBC’s Bell said in a statement. In July HSBC became the first bank to join BT and Toshiba’s quantum secure metro network, working in collaboration with AWS, installing quantum infrastructure in its global headquarters in London’s Canary Wharf that spans 63 km via fiber-optic cables to its data center in Slough, England.
Laying The Foundations For The Quantum Economy
But financial institutions can’t ensure quantum security on their own . It will require agreement on international technical standards and collaboration with governments; regulators, industry players and vendors. To that end the Forum, in collaboration with the Financial Conduct Authority (FCA), has gathered regulators, central banks, industry players and academia for coordinated round tables and curated discussions. The resulting January report on quantum security for financial services provides a four-phase roadmap to help the financial sector establish a more collaborative and harmonized global approach.
Other sectors will also need to lay the groundwork for what the Forum calls the new Quantum Economy.
The marriage of quantum physics and AI “will enable everything from detecting the most minute variations in the human heartbeat to solving large-scale crises like climate change – and we can do it all right now without quantum computers,” SandboxAQ CEO Hidary wrote in a Linkedin post. “The effects of AQ will run wide and deep, but these exciting breakthroughs won’t just happen on their own. It’s essential that organizations start laying the foundation for their future success with quantum today. Classical physics already revolutionized every industry over a century ago like medicine, finance and materials, and with AI, Quantum Physics will revolutionize each industry again.”
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