In the past decade, there has been accelerated development of the technology sectors. Various technologies developed during this time have had a huge impact on both large and small businesses in all industries. The main areas of focus thus far have been the integration of AI into business processes and the digitization of various processes. However, there has also been growing interest in the potential of quantum and quantum-inspired computing.
Quantum Computing Versus Quantum-Inspired Computing
Quantum computing is an area of research and development that has received growing attention and made major advancements in the past few years. The goal of research in this area is to harness quantum mechanics to create computers that operate on quantum bits, known as qubits.
Qubits, unlike bits, used in classical computing do not have a value of 0 or 1. Instead, a qubit can be 0 and 1 at the same time or any value between that. In short, a qubit works by measuring the probabilities of an outcome.
The goal of quantum computing is to deal with issues that cannot be solved using classical computing, even when using the most powerful supercomputers in the world. However, operating a quantum computer is very difficult and costly. Even the biggest quantum annealers, which are a specialized type of quantum computers, do not have the full connectivity to deal with the biggest optimization problems.
A solution to the problems of quantum computing is the use of quantum-inspired computing. With
quantum-inspired computing, the world can get some of the benefits that real quantum computing will offer in the future.
For instance, quantum-inspired computing could help to solve more complex combinatorial optimization issues that are common in many industries. The aim is to find a maximum or minimum solution from large, finite sets of presumptions.
For the banking sector, which increasingly has to deal with huge amounts of data and complex market, there are serious benefits to using quantum-inspired computing. Some of these benefits are:
Optimization of Currency Arbitrage
Currency arbitrage is the process through which banks make a profit from buying and selling fiat currencies. It could benefit a great deal from quantum-inspired computing. The windows for making a profit are usually small and powerful processors are used to identify and take advantage of the opportunities. Thus far, small-scale studies have shown that banks could benefit from using the technology in their operations.
Dynamic Portfolio Optimization
Dynamic portfolio optimization utilizes a huge number of variables to determine the best combination of assets that a financial institution should hold. It means checking factors such as the portfolio performance over time, possible trading fees, as well as the potential impact on the price by high volume selling and buying. By using quantum-inspired computing, these calculations can be done much faster.
Static Portfolio Optimization
Portfolio optimization entails picking assets that, when combined, give customers better returns. The optimization is based on factors such as risk and investor profiles. A method used to improve the efficiency of the process is to group the asset in a portfolio into subsets that have common risk factors.
However, as more assets are added to the portfolio and the factors to be check increases, the possible combinations grow exponentially. It then means that an exponential number of calculations have to be
conducted to get an optimal outcome.
In one study conducted by BBVA using the Fujitsu Digital Annealer, it was found that better results could be achieved using the quantum-inspired hardware system compared to traditional approaches. It is especially so when there are over 100 assets or factors that need to be considered in the calculation.
Growing Investment in Quantum-Inspired Computing
Some of the largest financial institutions in the world realize the potential of the technology. As a reality, millions of dollars have been invested by these banks to improve the technology. While actual quantum computing is still years away from launch, quantum-inspired computing makes it possible to get the benefits promised by the technology now.
One company that has successfully demonstrated the potential of this technology is Fujitsu. Both large and small firms in the banking world can utilize the benefits of the technology today to optimize their profitability and deliver better services to their clients.
In the fast-paced modern financial world, being able to assess risk quickly and make optimal decisions has become increasingly important. However, classical computing is lagging when it comes to assessing all the factors that go into the decision-making process. One solution that has shown great promise is the use of quantum-inspired computing.
Quantum-inspired computing will not solve all the issues in the banking sector. However, various studies have shown that it could help to provide solutions to some of the main issues better than the most powerful supercomputers in the world.
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