Financial firms seek lead in algorithms inspired by quantum computers

Quantum computing, which promises to significantly increase processing speeds, is still years away from full commercial implementation, but some financial services companies are turning to quantum-inspired technology for temporary benefits.

Traditional computers store information as zeros or ones. Quantum computers use quantum bits, or qubits, that represent and store information in a quantum state that is a complex mix of zero and one. Machines that can support this quantum state have the potential to sift through a myriad of possibilities in near real time, potentially solving problems beyond the reach of today’s most advanced computers.

Quantum-inspired technology is a broad term that refers to the use of certain algorithms that typically run on quantum computers on fast-processing classical computers. These kinds of algorithms are well suited to solving optimization problems, which are common in the financial services industry and include things like risk analysis and derivatives pricing, said Carl Dukatz, Quantum Program Lead at

Accenture

PLC.

Interest in quantum-inspired technology has grown as executives hear about developments in real quantum computing, analysts say. Companies including:

HSBC

holding PLC,

Ally Financial Inc.

and Spanish multinational bank

BBVA

are looking for quantum-inspired technology for short-term benefits.

Applications of quantum-inspired optimization problems can yield solutions that are between 1% and 10% more accurate than existing approaches and can arrive at solutions two to three times faster, said Troels Steenstrup, technology head of KPMG’s Global Quantum Hub.

According to Will Zeng, head of quantum research at

Goldman Sachs Group Inc.,

It makes sense that the demand for financial services is so high, because the industry has well-specified math problems, where incremental improvements in computer science can mean huge differences in profits.

“There are certainly big, valuable problems that have a theoretical quantum advantage,” said Dr. sing.

Still, quantum computers today are far from ready for large-scale commercial exploitation. Qubits, the quantum version of a computer bit, are delicate and easily disrupted by changes in temperature, noise or frequency. The number of qubits running in today’s quantum machines remains relatively small, meaning: experiments are currently limited to a narrow strip of information.

When Google announced plans last year to launch a commercial quantum computer by 2029, it said it was aiming for a 1 million qubit machine, when its systems had fewer than 100 qubits at the time.

“There are certainly big, valuable problems that have a theoretical quantum advantage.”


— Will Zeng, head of quantum research at Goldman Sachs

“The main focus in the near term is really on the quantum-inspired type of activity,” said Steve Suarez, HSBC Global Head of Innovation, Global Functions. The London-based bank started an official quantum program in August 2021.

The applications the bank is currently exploring relate to portfolio optimization and pricing, said Philip Intallura, HSBC’s Global Business Lead for Quantum Computing.

“The inspired technologies lend themselves very well to that,” said Dr. Intalura.

To turn these processes into quantum-inspired solutions, the traditional algorithm must first be rewritten as one that typically runs on quantum machines, said Dr. Steenstrup from KPMG.

Companies often do optimization problems using linear equations. In one of the quantum-inspired modes, those linear equations are rewritten as quadratic equations, in which multiple variables can be multiplied together. That’s one of the few differences between the initial equation and the quantum-inspired process, said Dr. Steenstrup.

After the algorithm has been rewritten, it is a matter of testing on certain types of classic machines to determine whether the new algorithm works faster and more effectively than the traditional ones.

Ally Financial began work in this area in late 2021. Sathish Muthukrishnan, Chief Information, Data and Digital Officer, said the company has built a number of quantum-inspired algorithms and is currently testing them. He said work is currently focused on areas such as pricing, portfolio optimization and other business use cases.

Muthukrishnan said he has yet to find a quantum-inspired solution that works so much better than a traditional equation that he has to rush to implement it.

“I also want to make sure I go to market with the most impactful quantum-inspired algorithm I can,” he added.

Testing these solutions is also a priority for Escolástico Sánchez, leader in quantum discipline at BBVA. dr. Sánchez said he has been working on proof of concept for several solutions in this area, including an algorithm designed to aid in portfolio management.

Running the algorithm on previous data sets has shown promising results, said Dr. Sánchez, though the bank needs to do more work to ensure the solution works on current and future data sets before drawing up a plan to implement.

In terms of real quantum, Dr. Sánchez: “sooner or later I think this hardware will be valuable and robust enough to solve some problems better than classic [computers]†

write to Isabelle Bousquette at [email protected]

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