In an age where digital transformation is the order of the day for financial organisations across the globe, one key area of focus for tech and finance enthusiasts alike has been the rise of quantum computing.
Quantum computing is a type of computing that uses quantum mechanics principles, such as superposition and entanglement, to perform calculations much faster than classical computers. Instead of traditional bits (0s and 1s), it uses qubits, which can exist in multiple states simultaneously, enabling powerful problem-solving capabilities.
So, how can this help those in the RegTech space? In the opinion of Annalisa Camarillo, chief communications officer and head of marketing at Quantifind, quantum computing has the potential to revolutionise financial crime detection. However, its impact will be incremental rather than immediate in her view.
She said, “Quantifind believes the RegTech industry should be on the lookout a number of key transformations. Firstly, quantum computing will allow financial institutions to process massive risk models in seconds, instead of hours or days. This will enable real-time transaction risk assessments, dynamically factoring in historical data, behavioural anomalies, and geopolitical risk indicators.”
Additionally, current fraud detection relies on machine learning models that often struggle with evolving threats. Quantum algorithms, meanwhile, can identify subtle, non-linear relationships in transaction data, enhancing AML anomaly detection and entity resolution to uncover hidden connections between illicit actors.
“Quantum computing will also create new security risks by breaking traditional encryption methods used in financial transactions,” said Camarillo. “The industry must prepare by investing in post-quantum cryptography to protect sensitive regulatory and compliance data.”
She concluded, “While still in early application for RegTech, quantum computing is a game-changer for fraud detection and regulatory risk modelling, offering unparalleled computational power to stay ahead of sophisticated financial crime schemes.”
From inexplicable to possible
There is an often-held belief that technologies such as quantum computing have for a long time existing in the world of science-fiction – something that could arrive one day in the future, but not likely soon.
In the opinion of South African RegTech RelyComply, quantum computing has gone from sounding like an inexplicable theory in a physics textbook to an ever more useful tool for data processing.
The firm said, “It’s not so much a NASA-level implementation as it is being spearheaded at tech giants we use daily, including IBM, Google, and even PayPal and JPMorgan Chase, for fraud detection.
“These systems can perform advanced calculations faster than classical computers by simultaneously leveraging qubits in multiple states. As AI’s data processing power is revolutionising risk modelling in financial services, quantum measures are even more supercharged in simultaneously analysing the success of scenarios and predictable outcomes.”
When applied to risk management processes, this can make it simpler for firms to identify the most effective strategies for mitigating any financial crime threats. “Through quantum algorithms, the speed for decision-making already made quicker through AI models is only exemplified,” said RelyComply.
Storing and processing mass data is an integral aspect of AML, and quantum computing can often benefit industries that necessitate high-security protocols such as government bodies.
RelyComply detailed, “However, as with other advanced digital tools, it’s not without problems in the wrong hands: criminals can manipulate financial markets with quantum methods and attack algorithms safeguarding the blockchain, destroying the reputation of evolving digital assets already under scrutiny. One high-risk area is encryption security, where quantum computer capabilities can bypass today’s standards.”
Despite this, an area of particular good news is that the World Economic Forum is aware of the collaborative effort towards advanced data usage. RelyComply remarked that regulatory bodies are assessing these quantum implications of digital payment security, where cross-industry standards are hoping to build safeguards for the financial infrastructure through public-private partnerships. The EU attempts to coordinate ways to introduce an infrastructure built to use quantum computing safely.
RelyComply concluded, “As takeup grows, it’s a potential revolutionary tool for financial institutions. Until then, best practice frameworks for DevOps and digital risk management are stressed, and customer data protections, transparency, interoperable platforms, and unified cybersecurity must be strengthened to make an imminent transition to quantum computing more seamless.”
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