Financial Sector Begins Preparing for Quantum Computing Risks and Opportunities
Financial institutions worldwide, including banks, insurance companies, and investment firms, are increasingly examining the potential impact of quantum computing on data processing, risk management, and cybersecurity. Unlike classical computers that use bits representing 0 or 1, quantum computers use qubits capable of superposition, allowing them to perform certain calculations much faster and differently. This capability could revolutionize financial operations such as portfolio optimization, asset pricing, liquidity management, credit and market risk analysis, fraud detection, and anomaly identification, especially when combined with artificial intelligence.
However, alongside these opportunities lies a significant threat: sufficiently powerful quantum computers could break current encryption methods that protect bank accounts, payments, communications, and critical financial infrastructure. This risk could escalate from a technological issue to a systemic one. Additionally, hostile actors may already be collecting encrypted data to decrypt later once quantum technology matures, a scenario known as "Harvest Now, Decrypt Later."
Although quantum computing is not yet integrated into daily banking operations, experts emphasize the urgency of early preparation. Transitioning to quantum-resistant encryption is complex and lengthy, particularly for large financial institutions reliant on legacy systems and multiple vendors. Regulatory bodies have started to respond; for example, Singapore's Monetary Authority issued guidelines on quantum computing risks and the need for quantum-safe encryption. Hong Kong's authority has taken a broader approach by promoting research, encouraging banking sector readiness, and developing a Quantum Preparedness Index to assess banks' quantum readiness.
These regulatory steps highlight the necessity of proactive risk mapping, requiring financial institutions to develop preparedness plans, gradually adopt quantum-resistant encryption, and integrate quantum risk into existing cybersecurity and operational resilience frameworks. Simultaneously, regulators should foster innovation to harness quantum technology's benefits for the financial system and the public.
Israel is urged to initiate similar preparations through coordinated regulatory efforts involving financial regulators, institutions, and the tech industry to map risks and opportunities and create a roadmap for quantum readiness. While quantum computing has not yet transformed finance, the time to prepare is now.
The article is authored by Professor Ruth Plato-Shenar, head of the Center for Banking Law and Financial Regulation at Netanya Academic College, a member of the advisory committee to the Governor of the Bank of Israel on banking matters, and deputy chair of the advisory committee to the Capital Market, Insurance and Savings Supervisor. The views expressed are her own.
