As quantum technology matures, early adopters like HSBC aim to explore its potential to transform financial services. Quantum computing promises to redefine approaches for complex tasks like optimization, unlocking major efficiency gains and cost reductions.
A report by McKinsey predicts quantum may create around $700 billion in value for financial institutions. Early success stories lend credence to its game-changing potential.
HSBC recently collaborated with quantum startup Terra Quantum to tackle a business-critical optimization challenge in banking – collateral management. This project offered a glimpse into the future transformative power of quantum techniques.
The Quest to Optimize Capital
Collateral optimization involves strategically managing collateral assets to meet regulatory requirements while minimizing costs. It enables banks to balance financial risks, liquidity needs, and profitability.
Current optimization methods rely heavily on linear programming algorithms. But as problem complexity grows, classical techniques falter. Quantum promises exponentially greater problem-solving potential through “qubits” that allow parallel processing of vast datasets.
As Steve Suarez, founder of HorizonX and former HSBC Global Head of Innovation, explained, “It’s been super exciting working in the quantum space with companies like Terra Quantum and its suite of cutting-edge hybrid quantum algorithms. Together we have explored the ability and readiness of hybrid quantum to take on large-scale, business-critical problems and create transformational impact.”
The objective of HSBC’s project was to demonstrate hybrid quantum optimization prowess for widespread financial applications. Success could position early adopters like HSBC to achieve better capital optimization and significant competitive advantage.
Hybrid Quantum Brings Quantum Power Today
Terra Quantum specializes in hybrid quantum solutions combining classical and quantum resources. Their portfolio of proprietary algorithms and solvers aims to deliver quantum advantages today.
For the HSBC prototype, Terra Quantum leveraged its TetraOpt solver. It functions as an enhanced optimization engine able to handle higher complexity and nonlinear constraints compared to traditional techniques.
By reformulating collateral optimization as a quadratically constrained problem, TetraOpt can search for solutions more efficiently at scale. This showcases a pathway for hybrid quantum to revolutionize vital optimization tasks for banks.
Vishal Shete, Terra Quantum’s Managing Director UK, noted “Optimization of capital is one of the core functions in a bank. Quantum technologies have the potential to enhance optimization solutions across many parts of a financial institution, we look forward to realizing the benefits of this in the near-term future.”
Demonstrating Quantum Progress in the financial services
This successful proof-of-concept demonstrates quantum computing’s maturing status. Quantum is transitioning from pure science towards practical business tools.
Markus Pflitsch, CEO of Terra Quantum, said “Working with HSBC allows us to apply our cutting-edge technology to real-world use cases at a world-class leading financial institution. Hybrid quantum algorithms will revolutionize large-scale intractable optimization tasks in the future. We want to demonstrate some of that potential already today.”
While universal quantum computers may still be years away, hybrid approaches like Terra Quantum’s leverage quantum and classical resources in tandem. This unique fusion can deliver concrete bottom-line advantages to early adopters.
Financial leaders recognize quantum’s imminent impact. Collaborations like HSBC and Terra Quantum’s optimised capital project provide a valuable testing ground and progress benchmark as the technology evolves.
Quantum’s Optimization Opportunities
Optimization is mission-critical across banking, impacting functions like managing risk, processing transactions, routing payments and beyond. As complexity increases, quantum techniques offer a new paradigm.
Areas ripe for optimization gains include:
- Portfolio optimization – Balancing returns and risks.
- Fraud detection – Identifying suspicious patterns.
- Regulatory compliance – Navigating complex policies.
- Transaction processing – Efficient routing and execution.
- Customer retention – Optimizing loyalty programs.
Quantum computing brings exponential problem-solving potential. This unlocks the door to next-level optimization across the financial sector.
Leading the Quantum Future
We stand at the cusp of a quantum revolution as computing crosses the threshold from lab science to business reality. Quantum promises immense opportunities for first movers to gain an advantage.
HSBC’s optimization prototype with Terra Quantum represents the shape of things to come. Quantum will redefine solutions for capital efficiency along with countless other complex business challenges.
Financial institutions must begin exploring quantum applications today to lead this next era of computing. By investing early, financial leaders can optimize quantum capabilities for long-term success.