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Article
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7-min read
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27 July 2023

Industry spending on quantum computing will rise dramatically. Will it pay off?

Many financial services firms will load up on quantum technologies to enhance capabilities and gain a competitive edge. But they may need to play defense first.

By Scott Buchholz, Mohak Bhuta, Doug Dannemiller
Article
 • 
7-min read
 • 
27 July 2023

The age of quantum computing is fast approaching, and the financial services industry should prepare now. Increased capital investments and patent filings for hardware technology indicates spending on quantum-related capabilities will likely grow quickly over the next few years.1 Globally, the financial services industry’s spending on quantum computing capabilities is expected to grow 233x from just US$80 million in 2022 to US$19 billion in 2032, growing at a 10-year CAGR of 72% (figure 1).2 Firms that are working on developing quantum-related capabilities now could enjoy a competitive advantage as these capabilities mature.

 

Quantum computers are expected to radically enhance computational capabilities for complex mathematical operations, such as financial simulation and modeling.3 They could also pose a risk to cybersecurity.4 This risk arises from their potential ability to implement an algorithm developed in 1994 by Peter Shor (Shor’s algorithm), which would render a lot of current-day cryptography obsolete.5 Although the timeline for such an attack to be mounted is uncertain, the need to mitigate the cybersecurity risk is so significant that the time to act is now.

On the software and services side, two factors are driving rapid adoption: increased demand due to quantum cybersecurity vulnerabilities, and the coalescence of entrepreneurial firms with point solutions that, in aggregate, provide a comprehensive mosaic of cybersecurity services. These groups are guided by solution aggregators that identify emerging technologies and guide entrepreneurs in their collaboration efforts.6 The point of this process is to harness emerging technologies to help provide broad solutions while mitigating the risks normally associated with implementing leading-edge technologies.

As technology develops and vulnerabilities grow, adoption of quantum computing-focused technologies will likely increase dramatically. On the growth side of the coin, there may be less urgency, but some firms are preparing nonetheless to generate revenue and delight customers with quantum computing enabled capabilities. But before those goals can be achieved, firm leaders may need to play defense—as with more power can come more threats.

“If you accept that there is a finite probability that a quantum computer capable of breaking asymmetric cryptography will exist, say within the next ten years, how long will it take you to upgrade your cryptographic infrastructure, and what is the expected lifetime of your data? If you do not yet know the answers to these questions, the time to act is now! Once you know these answers, you can start to prioritize your efforts and be better prepared once standards are finalized.”
—Colin Soutar, Managing Director, Deloitte & Touche LLP

BY

Doug Dannemiller

United States

Scott Buchholz

Deloitte United States

Mohak Bhuta

Deloitte India

Endnotes

  1. Doug Dannemiller, Krissy Davis, Julia Cloud, and Tony Gaughan, 2023 investment management outlook, Deloitte Insights, October 7, 2022.

  2. Deloitte Center for Financial Services analysis: Defensive spending is calculated using the median quantum cryptography market-size estimates of multiple market research reports with adjustments to get the share of the FSI spending. The offensive spending is a summation of the estimated spending on quantum computing talent and hardware by FSIs.

  3. Filipe Beato, Anne Ardon, Itan Barmes, and Chris Knackstedt, Transitioning to a quantum-secure economy, World Economic Forum and Deloitte, September 2022.

  4. Ibid.

  5. Deloitte, Future forward readiness: Quantum risk, 2022.

  6. Joe Faxlanger (Cyber Solutions Executive, RockITek), virtual interview with the author, March 31, 2023.

  7. Skip Sanzeri, “Banks need to act now to ensure post-quantum cybersecurity,” Security Today, March 7, 2022.

  8. Arthur Herman and Alexander Butler, Prosperity at risk: The quantum computer threat to the US financial system, Hudson Institute, April 3, 2023.

  9. Nancy Liu, “‘Harvest now, decrypt later’ concern boosts quantum security awareness,” SDxCentral, September 28, 2022.

  10. Deloitte Center for Financial Services analysis.

  11. Lara George (Co-founder, Walacor), virtual interview with the author, March 27, 2023.

  12. Joe Faxlanger (Cyber Solutions Executive, RockITek), virtual interview with the author, March 31, 2023.

  13. Deloitte, Future forward readiness: Quantum risk.

  14. Finance Magnates, “Harnessing quantum computing for financial analysis and risk management,” April 13, 2023.

  15. Aaron Raj, “Here’s how quantum computing can enhance financial services,” Techwire Asia, January 18, 2023.

  16. Jonathan Ruane, Andrew McAfee, and William D. Oliver, “Quantum computing for business leaders,” Harvard Business Review, January-February 2022.

  17. Deloitte, Future forward readiness: Quantum risk.

  18. Dannemiller, Davis, Cloud, and Gaughan, 2023 investment management outlook.

  19. Greg Noone, “Who are the early adopters of quantum computers? Big banks, that’s who,” Tech monitor, January 12, 2023.

Acknowledgments

Authors Mohak Bhuta and Doug Dannemiller wish to thank the following Deloitte Center for Financial Services colleagues for their insights and contributions: Patricia Danielecki, Sean Collins, Neerav Shah, Alice Hartnett, Seth Raskin, and Paul Kaiser.

Cover image by: Natalie Pfaff