BBVA: The Promise Of Quantum Computing For Banking And Financial Services
Computers have underpinned the digital transformation of the banking and financial services sector, and quantum computing promises to elevate this transformation to a radically new level. BBVA, “the digital bank for the 21stcentury”—established in 1857 and today the second largest bank in Spain—is at the forefront of investigating the benefits of quantum computing.
“We are trying to understand the potential impact of quantum computing over the next 5 years,” says Carlos Kuchkovsky, global head of research and patents at BBVA. Last month, BBVA announced initial results from their recent exploration of quantum computing’s advantage over traditional computer methods. Kuchkovsky’s team looked at complex financial problems with many dimensions or variables that require computational calculations that sometimes take days to complete. In the case of investment portfolio optimization, for example, they found that the use of quantum and quantum-inspired algorithms could represent a significant speed-up compared to traditional techniques when there are more than 100 variables.
After hiring researchers with expertise in quantum computing, BBVA identified fifteen challenges “that could be solved better with quantum computing, faster and with greater accuracy,” says Kuchkovsky. The results released last month were for six of these challenges, serving as proofs-of-concept for, first and foremost, the development of quantum algorithms and also for their application in the following five financial services tasks: Static and dynamic portfolio optimization, credit scoring process optimization, currency arbitrage optimization, and derivative valuations and adjustments.
Another important dimension of BBVA’s quantum computing journey is developing an external network. The above six proofs-of-concept were pursued in collaboration with external partners bringing to the various investigations their own set of skills and expertise: The Spanish National Research Council (CSIC), the startups Zapata Computing and Multiverse, the technology firm Fujitsu, and the consulting firm Accenture.
Kuchkovsky advises technology and business executives in other companies, in any industry, to follow BBVA’s initial steps—surveying the current state of the technology and the major players, developing internal expertise and experience with quantum computing and consolidating the internal team, identifying specific business problems, activities and opportunities where quantum computing could provide an advantage over today’s computers, and develop an external network by connecting to and collaborating with relevant research centers and companies.
As for how to organize internally for quantum computing explorations, Kuchkovsky thinks there could be different possibilities, depending on the level of maturity of the research and technology functions of the business. In BBVA’s case, the effort started in the research function and he thinks will evolve in a year or two to a full-fledged quantum computing center of excellence.
Quantum computing is evolving rapidly and Kuchkovsky predicts that in five years, companies around the world will enjoy full access to quantum computing as a service and will benefit from the application of quantum algorithms, also provided as a service. Specifically, he thinks we will see the successful application of quantum computing to machine learning (e.g., improving fraud detection in the banking sector). With the growing interest in quantum computing, Kuchkovsky believes that in five years there will be a sufficient supply of quantum computing talent to satisfy the demand for quantum computing expertise.
The development of a talent pool of experienced and knowledgeable quantum computing professionals depends among other things on close working relationships between academia and industry. These relationships tend to steer researchers towards practical problems and specific business challenges and, in turn, helps in upgrading the skills of engineers working in large corporations and orient them toward quantum computing.
In Kuchocvsky’s estimation, the connection between academia and industry is relatively weaker in Europe compared to the United States. But there are examples of such collaboration, such as BBVA’s work with CSIC and the European Union’s Quantum Technologies Flagship, bringing together research centers, industry, and public funding agencies.
On July 29, Fujitsu announced a new collaboration with BBVA, to test whether a quantum computer could outperform traditional computing techniques in optimizing asset portfolios, helping minimize risk while maximizing returns, based on a decade’s worth of historical data. In the release, Kuchkovsky summarized BBVA’s motivation for exploring quantum computing:
“Our research is helping us identify the areas where quantum computing could represent a greater competitive advantage, once the tools have sufficiently matured. At BBVA, we believe that quantum technology will be key to solving some of the major challenges facing society this decade. Addressing these challenges dovetails with BBVA’s strategic priorities, such as fostering the more efficient use of increasingly greater volumes of data for better decision-making as well as supporting the transition to a more sustainable future.”
By Gil Press, August 25, 2020, published on Forbes