Community banks aren’t known for being the technology trailblazers of the financial services industry. Big spending on experimental technology is beyond the means of most small-to-midsized banks’ IT organizations at the best of times.
But quantum computing is one area of emerging technology they may not be able to afford to neglect. So, what do banking IT leaders need to know about quantum? And how can they prepare for this emerging technology without breaking the bank?
Current Stage of Quantum Development
Quantum technology is not yet in deployment at most financial institutions, but several pilots and proofs of concept have been tested with promising results, especially by larger banks. Bank of Canada and Crédit Agricole have completed proofs of concept involving cryptocurrency adoption, valuation of financial products, and credit risk assessment.
Aite-Novarica Group estimates that specific use cases combining quantum technology with artificial intelligence (AI) will have practical applications for banks by the mid-2020s. Binary core systems and applications could interoperate with third-party quantum solutions via microservices and APIs by 2025.
While quantum computers hold the potential for great gains in efficiency, the risks they pose to present-day security methods have also begun to loom over the financial services industry. Quantum computers have the potential to decrypt traditional methods of encryption, and furthermore, quantum computers and simulators are now accessible to the public via the cloud, meaning bad actors also have access to the new technology.
Even before decryption is possible, banks could be targeted in “harvest now, decrypt later” attacks where the encrypted data is stolen and kept by the bad actor in anticipation of quantum technology that will become available in the future.
What Should CIOs Do Now?
So, what can CIOs do today to prepare for the quantum revolution? One key step is moving core systems to the cloud, a process which banks have largely already begun. Once banks are on the cloud, they will be able to take advantage of new technology as soon as it becomes available via regular vendor updates, as opposed to the lengthy replacement process required by legacy solutions.
The combination of AI and quantum, known as quantum artificial intelligence (QAI), yields particularly pertinent applications for banks such as risk assessment and modeling. Banks can prepare for these use cases by continuing with any roadmap activities involving AI. Once QAI becomes available, it will be much easier for banks to implement if they are already using traditional AI and/or machine learning solutions.
Technology leadership should also ensure their staff are staying up to date on quantum news as a preliminary step to upskilling. There is already a shortage of skilled IT staff, and educational institutions have only just begun offering industry-preparation quantum degree programs such as master’s and bachelor’s degrees. Aite-Novarica Group predicts a severe shortage of quantum talent within the next decade as demand grows to far exceed the limited supply.
Once a quantum-aware culture has taken root, executives can consider offering existing staff mutually beneficial growth and development opportunities. Partnerships with local educational institutions can also be a great resource for obtaining newly qualified talent with in-demand skill sets.
In 2023, quantum computing (and its associated risks and benefits) is no longer the stuff of science fiction. The good news is that even small-to-midsized institutions can take practical steps to prepare for the quantum revolution.
These include continuing on the cloud journey, exploring AI solutions, and educating existing staff about quantum computing. For more on this topic, read my latest checklist report, designed specifically for community banks and credit unions: CIO/CTO Checklist for Community Banks and Credit Unions: Implications of Quantum on Technology Roadmaps. IT leaders are also welcome to join our upcoming Research Council meeting, which will take place on May 11, 2023 and will focus on quantum technology this quarter. Contact me at [email protected] to register.