Quantum computing in finance: A game-changer, eventually

Derik Breedt, technical team lead at Retro Rabbit.

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The rapid advancements in quantum computing research have positioned it as both a force for innovation and a looming threat to the financial sector. While some celebrate groundbreaking discoveries, others amplify concerns over the risks quantum computing may pose to financial institutions.

The United Nations has declared 2025 the International Year of Quantum Science and Technology, and experts speculate about the so-called 'Q-Day' − the moment when quantum computers will be capable of breaking the cryptographic systems that secure digital communications and transactions.

Financial institutions are already preparing for this shift. HSBC, in collaboration with IBM, anticipates that the financial services industry will be among the first to be transformed by quantum computing and artificial intelligence (AI) convergence.

Echoing this view, AI and quantum computing were key discussion points at the Singapore FinTech Festival in November 2024.

While quantum computing itself is not new, the excitement around its potential to go mainstream within the next few years is growing.

Quantum AI offers exponentially faster data processing, which could transform risk mitigation, fraud detection and financial modelling. By enhancing machine learning, it has the potential to reshape:

Risk estimation and trading strategies: Uncovering hidden correlations in vast datasets to improve market predictions.

Customer analytics and personalisation: Enabling banks, insurers and investment firms to provide smarter, AI-driven financial advice tailored to individual risk profiles.

Real-time risk analysis and portfolio optimisation: Allowing for more precise decision-making.

Insurance: Improving risk assessment, dynamic pricing and fraud detection, leading to hyper-personalised policies with greater predictive accuracy.

This technological leap is expected to drive efficiency and innovation across the financial sector.

Quantum computing also introduces significant risks, particularly in cyber security. Algorithms such as Shor's algorithm and Grover's algorithm could undermine the cryptographic protections that currently safeguard digital communications and transactions:

Shor's algorithm enables polynomial-time factorisation of large integers, threatening RSA and Elliptic Curve Cryptography (ECC) − which underpin authentication, transaction verification and secure communications.

Many experts believe it will take a decade before quantum computers can reliably break classical encryption.

Grover's algorithm accelerates brute-force attacks on symmetric encryption, reducing the effective key length of encryption standards like AES.

For financial institutions, the potential impact extends beyond encryption:

Compromised authentication mechanisms: Attackers could impersonate systems, manipulate transaction records, or gain unauthorised access to sensitive data.

Vulnerabilities in crypto-currencies: Bitcoin wallets, which rely on ECC, could be at risk if a sufficiently powerful quantum computer derives private keys from public ones.

Although quantum computers could theoretically break these encryption methods, doing so would require fault-tolerant quantum machines with millions of stable qubits. Currently, the most advanced quantum computers operate with only a few thousand noisy qubits, making these threats largely theoretical for now.

Despite significant progress, quantum computing remains far from mainstream adoption. Major challenges include:

Qubit stability and error correction: As quantum computers scale, maintaining coherence becomes increasingly difficult.

Extreme operating conditions: Most systems require temperatures near absolute zero.

The need for millions of qubits: Breaking RSA-2048 encryption, for example, is estimated to require around 6 190 logical qubits, translating into millions of physical qubits when accounting for error correction.

While research continues at a rapid pace, many experts believe it will take a decade before quantum computers can reliably break classical encryption.

Quantum computing is advancing, but mainstream adoption remains distant. Several breakthroughs − such as room-temperature superconductors, mechanical qubits, or Google's new Willow chip − could help overcome existing limitations.

For now, access to quantum computing remains expensive and largely limited to cloud-based services.

Meanwhile, cryptographic experts are actively developing post-quantum cryptographic standards to mitigate potential threats. Industry commentary suggests that most financial institutions will likely be quantum-immune before quantum computers become a mainstream security risk.

As quantum computing matures, its impact is likely to be transformative, much like GPUs and AI have been − revolutionising some tasks, while serving as an additional tool for others.

Quantum computing holds immense promise for the financial sector, offering both opportunities and risks.

While it is not yet ready to disrupt global financial systems, the race to prepare for its eventual rise has already begun. Institutions that invest in quantum-readiness today will be best positioned to navigate the future of finance.