Quantinuum and HSBC explore Quantum Computing for Financial Cybersecurity and Fraud Detection.
In May 2023, Quantinuum, the world’s largest quantum computing company, and HSBC, one of the largest banking and financial services organizations globally, announced a partnership to explore the potential near and long-term benefits of quantum computing for banking applications. This collaboration focused on specific areas critical to the financial industry: cybersecurity, fraud detection, and natural language processing.
HSBC faced several complex challenges that traditional computing approaches struggled to address effectively, particularly in areas where security, data analysis, and customer interaction intersect.
Cybersecurity Threats. The banking industry faces ever-evolving cybersecurity threats, with sensitive financial and customer data as prime targets. Additionally, the looming threat of quantum computers breaking existing cryptographic systems poses a significant long-term security risk. This “store now, decrypt later” vulnerability meant that encrypted data captured today could potentially be decrypted once quantum computers reach sufficient capability, creating an urgent need for quantum-resistant security solutions.
Fraud Detection Complexity. Financial fraud detection involves analyzing massive datasets with numerous parameters to identify suspicious patterns. Traditional machine learning approaches often struggle with the high dimensionality of these datasets, where adding more parameters exponentially increases the computational complexity. More effective methods were needed to detect sophisticated fraud attempts in real-time.
Natural Language Processing Limitations. In regulated financial environments, transparency and explainability in AI systems are crucial. Traditional “black box” large language models often lack the explainability required for applications involving sensitive customer data. HSBC needed more transparent approaches to natural language processing that could maintain regulatory compliance while improving customer service.
The Quantinuum-HSBC partnership developed a multi-faceted approach to address these challenges, leveraging different aspects of quantum computing technology:
Quantum Origin for Enhanced Cryptography. The first component of the collaboration focused on implementing Quantinuum’s Quantum Origin platform to strengthen cybersecurity. Quantum Origin uses the operations of a quantum computer to generate cryptographic keys that are provably unpredictable, offering a level of randomness and security that classical systems cannot achieve. This system was designed to integrate with existing “classical” cybersecurity infrastructure through hardware security module (HSM) providers, allowing HSBC to enhance their security posture without overhauling their entire security architecture.
Quantum Machine Learning for Fraud Detection. The partners explored how quantum machine learning (QML) techniques could improve fraud detection capabilities. By leveraging quantum computing’s ability to efficiently process high-dimensional data and explore complex pattern spaces, they aimed to develop more effective models for identifying fraudulent transactions. These QML approaches were enhanced by Quantinuum’s TKET software development platform, which provided qubit routing and circuit optimization techniques to improve the efficiency and effectiveness of quantum algorithms on current hardware.
Quantum Natural Language Processing. The third component focused on quantum natural language processing (QNLP), a novel approach to language-based AI that uses quantum states and processes to encode word meanings. Unlike traditional “black box” language models, QNLP offered a more explainable approach to tasks such as question answering and text similarity analysis. This quantum approach to NLP aimed to provide the transparency needed in regulated markets while maintaining the sophisticated language processing capabilities required for effective customer service.
The implementation of these quantum solutions involved several phases and components, leveraging Quantinuum’s hardware and software expertise alongside HSBC’s financial domain knowledge.
Quantum Cryptography Integration. HSBC and Quantinuum implemented Quantum Origin via an HSM provider, integrating quantum-generated cryptographic keys into the bank’s existing security infrastructure. This approach allowed HSBC to enhance security while maintaining compatibility with their current systems. The implementation included exploration of how Quantum Origin could be combined with post-quantum cryptographic algorithms to create a comprehensive defence against both current threats and future quantum-enabled attacks.
Fraud Detection Prototyping. For the quantum machine learning component, the partners developed prototype fraud detection systems that could analyze transaction patterns using quantum algorithms. These prototypes were designed to evaluate how quantum computing might offer advantages over classical approaches, particularly for problems involving many variables and complex relationships. The implementation leveraged Quantinuum’s TKET platform to optimise quantum circuits for current quantum hardware, addressing the limitations of noisy intermediate-scale quantum (NISQ) devices while still exploring potential quantum advantages.
QNLP Development. The QNLP implementation used Quantinuum’s LAMBEQ software, which enables the design and implementation of end-to-end quantum natural language processing pipelines. This development focused on training quantum states and processes to encode word meanings in ways that preserved explainability while maintaining performance. The partners explored how these QNLP approaches could be applied to specific financial use cases, such as customer question answering and document similarity analysis for compliance purposes.
While the partnership was initially exploratory in nature, it yielded several significant outcomes with implications for the future of quantum computing in financial services. The implementation of Quantum Origin provided HSBC with an additional layer of security based on quantum-generated cryptographic keys. This enhanced protection for the bank’s most sensitive data against both current threats and potential future quantum attacks. In 2024, HSBC conducted a pilot combining Quantum Origin and post-quantum cryptography to future-proof gold tokens against “store now, decrypt-later” threats, demonstrating a practical application of quantum security technology in financial transactions.
The research collaboration also provided valuable insights into the potential advantages and limitations of quantum computing for financial applications. While full quantum advantage may still be years away, the partners identified specific areas where quantum approaches showed promise for improving performance over classical methods. This research helped HSBC develop a clearer roadmap for quantum computing adoption, identifying which applications might benefit from quantum technologies in the near term and which would require more mature quantum hardware.
The partnership positioned both organizations at the forefront of quantum computing applications in financial services. For HSBC, it provided access to cutting-edge quantum hardware and expertise, helping them prepare for a future where quantum computing could transform banking operations. As Philip Intallura, Global Head of Quantum Technologies at HSBC, noted, the collaboration provided “a great opportunity to access cutting-edge quantum hardware and take our use cases to a truly transformational level”.
The Quantinuum-HSBC partnership outlined several directions for future development of quantum applications in financial services:
Expanded Cybersecurity Applications. Building on the success of their initial Quantum Origin implementation, the partners identified opportunities to extend quantum-enhanced security to additional areas of banking operations. This included exploring how quantum random number generation could improve security for a wider range of financial transactions and systems.
Advanced Quantum Algorithms for Finance. The partners planned to develop more sophisticated quantum algorithms for financial modeling and risk management, addressing the “curse of dimensionality” and NP-hard optimization problems that challenge classical computing approaches. This research aimed to create hybrid classical-quantum methods that could provide practical advantages for complex financial calculations.
Quantum-Ready Workforce Development. HSBC recognized the importance of building internal quantum expertise to fully leverage the technology’s potential. The bank has been building a dedicated quantum research team and in-house team of PhD scientists to formalize quantum use cases into deep research projects and develop patents and quantum products.
Broader Industry Transformation. The partners envisioned their collaboration as part of a broader transformation of the financial services industry through quantum computing. By developing and implementing quantum-based solutions, they aimed to establish new standards and approaches that could revolutionize banking operations across the sector.