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Quantum Computing: Predicting Portfolio Optimisation’s Future

Interview by Zoya Malik (Managing Editor)

Financial services will need to experiment with early developments of QC technology and QC simulation predictions and deploy the technology into their mainstream banking operations, as soon as it becomes available. Ian Bradbury, CTO Financial Services at Fujitsu UK & Ireland spoke to Zoya Malik, managing editor TFT to explain how these predictions will impact near –real-time optimal risk portfolio holdings.

ZM: How is quantum computing currently being adopted into mainstream banking activities?
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(Ian Bradbury, CTO Financial Services, Fujitsu UK & Ireland)

IB: Quantum Computing is currently a developing technology – it is not yet completely ready for mainstream banking activity deployment and will not be for a number of years.  However, given that Quantum Computing potentially brings a very significant improvement in terms of solving complex optimisation problems in near real time, many financial services are looking to experiment with early developments of QC technology or QC simulation so that they can deploy the technology into mainstream banking operations as soon as it becomes available. 

It is also quite possible that some financial services organisations will look to deploy QC technology or QC simulation into certain niche complex optimisation operational activities in the next 12-24 months where there is a significant benefit over traditional computing solutions and operational stability can be guaranteed.

ZM: Which banks are investing in QC capabilities in the UK and overseas (retail, private, investment other) and in which geographies globally is there greater investment?

IB: Many financial services organisations are already experimenting with QC technologies through their innovation labs and technology partnerships. These organisations don’t usually disclose this innovation cycle experimentation to the market, as is normal practice, although some organisations (like NatWest) have revealed successful Proof of Concepts.  There is take-up across all geographies and sectors, and use cases are varied and wide.

ZM: Which banking and finance segments will look to harness QC and how will portfolio managers benefit in risk profiling? 

IB: With respect to risk profiling, QC can speed up computing so much that it potentially offers near –real-time prediction of optimal risk portfolio holdings, even taking into account a large number of variables and constraints. As the complexity of these calculations continue to rise, so traditional computing solutions reach a point where they are unable to provide useful input to a Portfolio Manager, as it takes so long to process the calculations. QC offers the potential to overcome this issue.

ZM: How can Fujitsu help banks optimise its mix of high quality liquid assets including bonds, cash and government securities?

IB: Fujitsu offers banks access to the Fujitsu Digital Annealer, a hybrid technology that merges Quantum Computing principles and techniques with a unique digital architecture. This produces a device which performs better than current Quantum Computers or simulators at a significantly lower price point and with the operational reliability of today’s computing architectures. This allows banks to experiment with and deploy Portfolio Optimisation solutions that perform significantly better than today’s current traditional computing technologies, utilising Quantum Computing modelling techniques, and with the levels of stability and resilience required by any bank.

ZM: What will be a particular use case for a wealth manager with QC power?

IB: At this stage, Portfolio Optimisation is one area where many are investigating the potential for QC deployment. In the same way that the technology that enabled High Frequency Trading (HFT) created changes in both the thinking and outcomes of trading practices, QC may well create changes to thinking behind Portfolio Optimisation.

 ZM: How will banks’ customers benefit their savings and investments portfolio? 

IB: Very broadly, QC should help banks to create portfolios that deliver better returns for less risk than those that utilise conventional computing solutions. 

ZM: How can QC bring in millennial customers and the non-banked to extend greater financial inclusion?

IB: QC is another element in the Digital Transformation that the entire financial services industry is undergoing.  In some cases, QC can unlock new digitisation deployments, which have previously been ignored due to inadequate compute power, which in turn drives the digitisation of other related and adjacent areas.  The net effect is to drive down costs, offer new services and support digital channels – all of which support greater financial inclusion and consumer take-up. 

ZM: How can fintechs compete and partner with banks to offer QC driven platforms? 

IB: Fujitsu offers its Digital Annealer as a cloud-based service which can be consumed by any organisation. Some banks are already working with an ecosystem of suppliers to develop QC solutions using cloud services such as that offered by Fujitsu.

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