# Quantum Computing in Finance: The Next Digital Arms Race?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-12-02
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Quantum Computing in Finance: The Future of Investment Insights
Meta Description: Discover how quantum computing is revolutionising the financial industry, unlocking new opportunities for trading optimisation and investment portfolio
URL: https://financedigest.com/quantum-computing-in-finance-the-next-digital-arms-racehtml

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_By_ **_Nguyen X. P.,_** _Chief Artificial Intelligence Officer at FPT Software_

_According to Domo, a human creates at least 1.7MB of data per second. As the amount of data continues to grow along with the rise of 5G and IoT, classical binary computing has its limitations in yielding big and meaningful insights, making quantum computing one of the fastest-growing digital trends, especially in the financial sector._

The concept of quantum computing first originated in the 1980s when physicists started [considering an entirely new approach](https://www.financedigest.com/britains-smes-urged-to-consider-reducing-uncertainty-as-brexit-approaches.html "Britain’s Smes Urged To Consider Reducing Uncertainty As Brexit Approaches") to solving calculations by using the intrinsic, quantum mechanical properties of matter. Built upon phenomena of quantum mechanics such as superposition and interference, the biggest difference between a quantum and a classical computer is the basic unit of information used – the bit. While a classical bit can only be in one of two states – 0 or 1, a quantum bit (or qubit) can take on more than one state at a time. This phenomenon is called superposition. Superposition effectively intensifies the qubits’ power and capacity, which allow [calculations to be run at higher speed and at lower power](https://www.financedigest.com/trace-software-international-introduces-eleccalc-2018-even-more-powerful-calculation.html "Trace Software International introduces eleccalc™ 2018: even more powerful calculation") consumption.

**Quantum computing as an opportunity**

Quantum technology is [expected to break through today’s complicated trading landscape by helping investment leaders](https://www.financedigest.com/what-is-expected-of-leaders-in-the-age-of-automation.html "What is expected of leaders in the age of automation?") brush up and rebalance portfolio diversification and investments, to better fit the market conditions as well as responding to investor goals. Of all the promising opportunities, Option [Pricing remains one of the most popular](https://www.financedigest.com/west-drayton-proves-popular-alternative-with-those-priced-out-of-london-market.html "West Drayton Proves Popular Alternative With Those Priced Out Of London Market"). It is an algorithmically provable quantum advantage with provable benefits compared to the classical Monte Carlo method. Other use cases for financial services may include issues related to [fraud detection](https://www.financedigest.com/the-clues-to-detecting-fraud-are-hidden-in-relationships.html "THE CLUES TO DETECTING FRAUD ARE HIDDEN IN RELATIONSHIPS"), portfolio risk optimisation and transactional settlement.

Being a step change in computational performance, quantum computing is still in its early stage; however, as it develops at a striking rate, it may soon transform a range of [financial services](https://www.financedigest.com/4-ways-high-performance-analytics-powers-financial-services.html "4 ways high-performance analytics powers financial services") applications. BFSI giants like Mitsubishi Financial Group, Citigroup or Wells Fargo have all started to [invest in and experiment with quantum computing](https://www.financedigest.com/embracing-cloud-computing-how-and-why-organisations-are-set-to-invest-more-in-cloud-computing-in-2023.html "Embracing Cloud Computing: How and why organisations are set to invest more in cloud computing in 2023") applications. According to the World Economic Forum, the global market for quantum computing is projected to [reach over 10 million](https://www.financedigest.com/700000-employees-across-the-uk-have-access-to-fair-finance-will-reach-one-million-employees-in-2017.html "700,000 Employees Across The UK Have Access to Fair Finance, Will Reach One Million Employees in 2017") US dollars by 2024. McKinsey also agrees that the financial industry is going to be the most likely sector to reap significant rewards from this technology in the [next few years](https://www.financedigest.com/1-in-10-workers-considering-a-career-change-in-the-next-year.html "1 in 10 workers considering a career change in the next year").

**A hybrid-classical approach**

Trading optimisation and investment portfolio optimisation have been among the most [common issues for financial](https://www.financedigest.com/3-common-financial-hurdles-for-the-self-employed-and-how-to-overcome-them.html "3 Common Financial Hurdles for the Self Employed (And how to Overcome Them)") institutions. [Addressing these problems](https://www.financedigest.com/its-time-to-address-asset-managements-image-problem.html "It’s time to address asset management’s image problem") using classical computing is an onerous process. Usually, an [investment portfolio](https://www.financedigest.com/heineken-to-invest-300-million-in-brazil-to-expand-premium-beer-portfolio.html "Heineken to invest 0 million in Brazil to expand premium beer portfolio") would contain dozens or even hundreds of assets and cover multiple periods, which a classical computer is unable to yield an accurate answer for within an acceptable time frame. These devices might clash, take too long to respond, or worse, [turn up with inaccurate results](https://www.financedigest.com/auriga-announces-new-analytics-software-module-to-help-banks-turn-data-into-results.html "Auriga announces new analytics software module to help banks turn data into results").

This is when quantum computing-enabled tools and quantum-based algorithms come to the rescue. With their unique capability of working with numerous variables simultaneously, they could quickly narrow down the [number of possibilities that need](https://www.financedigest.com/why-finance-teams-need-to-go-beyond-numbers-to-an-active-relationship-with-data.html "Why finance teams need to go beyond numbers to an active relationship with data ") to be explored. Classical computing could then be used to pinpoint the best answer. Such an approach is more robust, flexible, seeks [to improve algorithms with higher](https://www.financedigest.com/daimler-truck-sees-higher-returns-as-supply-chains-demand-improve.html "Daimler Truck sees higher returns as supply chains, demand improve") error tolerance, and is expected to be necessary to unfold the full potential of quantum methods.

**Prepare for a quantum** [powered future](https://www.financedigest.com/brighter-financial-futures-will-be-powered-by-better-infrastructure.html "Brighter financial futures will be powered by better infrastructure")

Many firms, especially large banks in Europe and America, have already realised the importance of [big data](https://www.financedigest.com/big-data-suggests-leicesters-football-success-could-usher-in-economic-boom.html "Big data suggests Leicester’s football success could usher in economic boom") processing. These businesses have proactively started building partnerships with quantum developers and [technology experts](https://www.financedigest.com/from-the-experts-5-payment-technology-trends-to-look-out-for-in-2016.html "FROM THE EXPERTS: 5 PAYMENT TECHNOLOGY TRENDS TO LOOK OUT FOR IN 2016") to discover new capabilities and leverage their cloud capability, while scouting for potential investments for a smooth adoption process.

However, solving the puzzle of quantum computing is not a one-day process. [McKinsey forecast](https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/a-game-plan-for-quantum-computing) that by 2030 the number of quantum computers operated will amount to only 2,000 to 5,000 units, whereas the hardware needed to solve its problems may not exist until 2035 or beyond. Quantum AI is estimated to arrive during the late 2020s at the earliest. Until then, [businesses are expected](https://www.financedigest.com/t-mobile-sells-wireline-business-to-cogent-for-1-expects-hefty-charge.html "T-Mobile sells wireline business to Cogent for , expects hefty charge") to adopt hybrid approaches to counter their optimisation issues.

As progress is being made, quantum [computing is still in its nascent stage compared to the complex financial](https://www.financedigest.com/tomorrows-world-how-cloud-computing-will-impact-the-financial-services-sector-in-2016.html "TOMORROW’S WORLD: HOW CLOUD COMPUTING WILL IMPACT THE FINANCIAL SERVICES SECTOR IN 2016") problems it is inquired to solve. However, given the potential quantum computing holds, quantum [computers will revolutionise the financial industry and start generating value](https://www.financedigest.com/the-value-of-cloud-computing.html "The Value of Cloud Computing") by the mid-2030s. The societal impact may not be instant, but it is crucial for [business leaders to prepare for this first wave of industries and get ready to harness](https://www.financedigest.com/trusting-your-gut-how-to-harness-the-power-of-your-business-instincts.html "Trusting your gut: how to harness the power of your business instincts") its potential.


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