Quantum Finance: The Future for Financial Services



Posted on: February 9, 2017 by Frederik Kerling





Could quantum computing change the way we look at Financial Services? Frederik Kerling, Business Consultant at Atos, considers its impact in this piece of speculative fiction…

The year is 2026. The clock has only just hit 7:00am but Alec Thompson, the CEO of Citizen Financials, is already at his desk.

Time is money they say, and in the Financial Services sector this mantra had never been more true. New technologies had continued to quicken the pace of the market, pushing it to breakneck speeds where success and failure was measured in milliseconds. The already complex systems had become impossible for the unaided human mind to comprehend, never mind compete in.

Citizen Financials needed to find a new way to beat the competition. Speed was no longer enough, something else was needed.

And that was why Thompson had agreed to this breakfast meeting. Expected to walk through the door at any moment was Richard Deutsch, a celebrated academic in the field of quantum computing. Despite his scholarly reputation, Deutsch is still an unknown quantity in the world of financial services. He had, however, promised to redesign Citizen Financials from the ground up.

And after having already seen the transformative power of technology first hand, Thompson knows enough to believe that this meeting would almost certainly be worth his time…

The door opened and Thompson nodded in greeting: “Good morning Mr Deutsch, thank you for coming.”

Wasting no time, Deutsch took a seat opposite the CEO. “Let me cut to the chase,” started Deutsch. “Your company makes trading decisions in milliseconds does it not? Almost as soon as the event has happened?”

- “It does indeed”

- “Well, wouldn’t it be more helpful to make trading decisions before the event even occurs?”

Thompson smiled: “Of course! What are you proposing – a time machine? A crystal ball perhaps?”

Deutsch gave a soft laugh: “It’s not a science fiction or fantasy. It’s very much possible; in fact, we could start it today.

- “We’ve had the foundations in place ever since Google’s DeepMind Go Project. The computer beating its human rival was almost inconsequential in relation to what the project ultimately achieved.

- “It was a turning point in the development of Artificial Neural Networks – or ANNs if you prefer! They are the bedrock of true Artificial Intelligence. More than just crunching data, machines learn from it and make decisions based on these learnings. This is how DeepMind became so good at Go – while it played thousands of games against humans – learning from these – it also played millions of games against itself, building its knowledge and ultimately beating the best that humanity had to offer.”

Thompson shifted uncomfortably in his chair: “So what does all this mean for Citizen Financials? How do we benefit?”

- “Making decisions,” noted Deutsch, “is all about predicting the future and making the best of your options. And with the right kinds of data, a computer can learn how to operate in the Financial Services market.”

- “Yes, yes,” waved Thompson. “We do that now: lots of data whirring away in our servers, spitting out insights.”

This time it was Deutsch who smiled: “It’s still not enough. You need to listen to everything. And we have an algorithm that can really listen. One that picks up all the chatter from the news, from social media, from site web traffic – no matter how seemingly innocuous the data, we can sift through it. From this data we can keep track of the possible impacts of any trade, how it shifts a market position and what you need to do in response.”

-“Ok, say we do that,” asked a clearly sceptical Thompson, “How do we crunch the data? Collecting it is one thing but we’re already at capacity, if we step it up any further our server costs are going to go through the roof.”

- “Agreed,” said Deutsch. “This is where my expertise comes in. Put the algorithm together with Quantum Computers – machines far more powerful than traditional processers – and the possibilities are huge.”

Deutsch stood up suddenly, pointing at the tablet on Thompson’s desk: “Is that graph representing your current stock price per millisecond?”

- “Yes… why?”

Saying nothing Deutsch pulled out his own tablet, and held it up for Thompson. A graph curved in front of him, an exact replica of his own screen – though seemingly several minutes ahead.

- “But... how did you get this data?” stammered Thompson. “This is highly confidential; we keep this data heavily protected; how on earth did you get in?”

- “I didn’t” answered Deutsch.

Realisation dawned on Thompson. For the second time this morning, he smiled: “Where do we sign up?”

The clock hit 7:34am. Barely half an hour has passed but for Citizen Financials everything has changed.

Once again, technology looked set to change the face of the financial services industry. AI and Machine-Learning had existed for a long time, but until the arrival of powerful quantum computers they could not reach this new level of utility. It could offer an automated future for the sector, allowing businesses an unprecedented insight into the thoughts, feelings and actions of their customers. A tempting offer for businesses, and an irresistible move for the industry.

While it is likely to be a decade before quantum technology starts to significantly impact the world of financial services, the potential implications of the technology mean that financial institutions must begin to prepare for its arrival now.

Take a look at our latest whitepaper for an in-depth view on how the current and emerging trends within quantum computing will influence the future of the Financial Services sector.