Straight from the FCA: Emerging Tech & Quantum—Opportunities, Risks, and Reality

In this episode of IA talks Innovation, we’re joined by the FCA’s Emerging Tech team, Fern Watson and Charlie Markham. We explore why the FCA is engaging with quantum now, where the most credible near and medium term use cases may emerge for asset managers, and what it will take to translate theoretical promise into commercial advantage. (We promise, we discuss in words and in mathematical equations!)

Transcript

SPEAKER_01 0:11

Welcome to IA Talks Innovation. You're joined by me, your hosts Shruti Depp today, and James King, your usual suspects at the IA. Today we're diving into the physics of the very small to explore how quantum computing could help tackle some of the biggest problems in finance, from optimization and modeling to security and resilience. And if you were at MTech Global 2026, you may have heard that familiar challenge, how do you explain quantum to your mother? But on a more serious note, it's genuinely encouraging to see a UK regulator taking such a lead on quantum, engaging early, asking the right questions, and helping the market understand both the opportunities and the risks. We're joined today by the FCA's emerging tech team to discuss their latest research note on quantum. Welcome, Dr. Fern Watson and Charlie Markham. Thank you.

SPEAKER_03 1:00

Hi.

SPEAKER_01 1:02

If I can just sort of delve into your note first, which says that the work was triggered by continued advancement and the need to understand implications for markets, consumers, and position the UK as a global financial centre. Why is the FCA, who are sometimes unfairly or not, seen as a safety first regulator, spending time in the lab with quantum physicists? Why quantum? Why now? Sorry, I've got so many questions. What made the FCA decide this was a critical moment to publish this recent research note?

SPEAKER_00 1:30

Yeah, I suppose it's a bit unusual. I guess when people think of a financial regulator, they don't necessarily think of all the research that we do. It's probably not quite true to say that we've been in the lab, although we've had the opportunity to visit a couple, and as the tech nerds that we are, we would love to have the opportunity to be out there in the lab and playing with the tech a lot more. So, first of all, I know we've had the introduction already, but let me just explain a little bit more about the team. We sit in the emerging tech team, which is an innovation function. So importantly, we're not a regulatory, policy-making, or supervisory team. Of course, we talk to all of those fantastic colleagues and work with them closely, but it's not why we exist as a team. Our remit is to be out there talking to academics and tech firms and seeing what's going on, being the lighthouse for the FCA, so to speak, shining a light on all the important research going on in technology that sits at relatively low TRLs across the UK and internationally that does or could have relevance for the financial services industry. So, as part of this, and I guess sort of proving your safety first point is true in a way, we started by looking at quantum computing through the lens of the risk it poses to cybersecurity. I think we'll probably come back to this subject a bit later on. So for now I'll just say that this is a really important topic and both uh one that both Charlie and I, as well as the wider FCA, take incredibly seriously and are actively working on. However, over the course of the last sort of 12 to 15 months, it's undergone a transition in our organization from research, so being driven by our team, into something more action-oriented, being driven by others. So, as I say, although Charlie and I are very much involved, we're not leading that anymore. But over that period, Charlie and I have become really interested in other topics around quantum computing, one of which is around the applications in financial services. So last year, Charlie collaborated with the Quantum Software Lab and National Quantum Computing Centre to produce a really comprehensive report on the topic called Quantum Computing Applications in Financial Services. And I think it's fair to say that looking at that topic has opened an absolute Pandora's box of other questions for us. Particularly with the UK government's mandate for growth, which the quantum missions and recent quantum leap announcement could play a huge role in. As the technology matures and is coupled with the FCA's renewed focus on tech its tech positive approach, the time is absolutely right to begin to ask some of those questions.

SPEAKER_03 3:51

Thanks, Fern. I suppose that also opens up the two follow-up questions of why quantum and why now. And really, as Fern alluded to, there is a huge amount of national and international momentum behind quantum technologies right now, with quantum computing unsurprisingly taking most of the spotlight. And if I think about it in simple terms, quantum computers give us a fundamentally new tool, right? They let us reapproach some of the hardest computational problems we rely on every day. And that's why there's so much anticipation. The idea that we might be able to solve certain problems more efficiently, more accurately, or even start tackling problems we've always set aside because classical methods struggle with them. And also, if we think about the foundational role that computation plays in modern economies and in financial services in particular, it's clear to see why the sector is paying attention. And then for a long time, I think quantum felt a bit like nuclear fusion. Always 10 years away, right? But over the last couple of years, the industry has made real progress moving from lab towards that early stage application. And if we just take a step back and think about it, say on the hardware side, quantum computers are scaling rapidly. We're seeing more physical qubits, more stable logical qubits, and systems that are edging beyond what we can simulate classically. That's a core building block for the future of quantum advantage, which is really the point where quantum computers can solve real-world problems that classical computers simply can't. And then there's also the software side, which actually doesn't get the limelight it deserves and actually needs. And again, we've seen major steps in error correction and algorithmic techniques, turning quantum from a scientific challenge into one of more of an engineering one. And this doesn't mean that I think we'll have full-scale quantum computers arriving tomorrow, but it does now mean that we're on this credible trajectory towards machines that are capable of solving real-world problems. So again, when you put those two trends together, it's easy to see why leaders in financial services have started experimenting more seriously. They're running those proofs of concepts, they're building that internal capability, and they're preparing for what comes next. And that's really the final factor in all of this. Firms are experimenting, they are preparing, and it felt like the right moment for us to deepen our engagement and for the FCA to publish the research note and bring clarity to that conversation.

SPEAKER_02 6:04

And can I just say that research note, cracking piece of work, I think for anybody listening who hasn't had a chance to take a look? Highly encourage you to do so. And in the research note, you highlight three main problem domains. I think for our audience, the investment management community, the portfolio optimization is probably the biggest, the most relevant one. So, how does a qubit handle complex portfolio differently than a high-performance classical computer that we might be using today?

SPEAKER_03 6:34

Yeah, that's a really great, great question. And let me just start off by saying, again, the research I do go into much more detail, but portfolio optimization is actually one of those quantum use cases that tends to land quite quickly with financial services audiences. And that's because at its core it's actually a very familiar problem to all of us. We're trying to get, or we're trying to choose a combination of assets that gives you the best return for a given level of risk. But the first thing to say, and I'm sure your listeners will be more aware of this than I am, but portfolio optimization isn't a single step, it's a workflow. Even in the broader sense, what you'll have is one side, which is portfolio construction, which is deciding which assets make up your portfolio, and then you have allocation, deciding how much of each asset you should hold. And quantum approaches really focus on that first step of construction, as allocation is extremely well serviced by classical optimization. So even in portfolio optimization, what we can begin to see is that we'll always have this hybrid classical quantum workflow begin to emerge. But let's actually just think about portfolio construction for a minute. And this is a combinatorial optimization problem. And what that simply means is that each time you add an asset, the number of possible portfolio combinations increases exponentially. And what that means is that creates a huge search space. And this is the type of problem where quantum approaches may provide that edge. So when we solve for this type of problem classically, classical computers explore that space sequentially, even if they are paralyzed, which means they go combination by combination, which means we end up relying heavily on heuristics or pruning to simplify or reduce the size of that search space to find a good enough but not truly optimal answer. And back to the point that I made probably in your first question, quantum computers provide us with a set of tools that allow us to take a different approach to solving problems. So the question really becomes: can we approach combinatorial problems differently? Not just faster in the traditional sense, but differently in how we explore that search space as it expands. And what we do is we typically reformulate this problem into something called a cubo. And the long form of that is a quadratic unconstrained binary opposition, or optimization, sorry. But really, all that means is we turn the portfolio into a series of yes or no decisions. So for each asset, we simply ask, is it in the portfolio or not? And we use qubits, so again, the information store of quantum computers to represent an asset's inclusion or exclusion, either through being in a one state on or a zero state off. So instead of trying to search through all the combinations like we might do classically, what we do instead is we encode the possible combinations into our qubits, or in other words, into the quantum system as a whole within the quantum computer. We then leverage things like superposition of qubits, which represent, which allow us to represent many different portfolio combinations and entanglement to ensure that we capture correlations between assets. But we're not measuring all of these combinations. What we're doing is we're creating a quantum system so that better portfolios become more likely to appear when we do finally take measurement. And that's again where we get this classical quantum feedback loop, and we get algorithms like the QAOA, which is the quantum approximate optimization algorithm, and they've always got such wordy names. Try not to say that one too. But really, this is about adjusting that quantum system that we built and repeating the process to gradually concentrate the probability of our outcome being around the best performing portfolios. Then once this structure is identified, we switch back to our classical tools to determine our allocation weights. So the real difference, going back to the question, is not that quantum replaces classical portfolio optimization, in so much that quantum may help us explore that enormous search space more efficiently, providing better candidates and then passing to classical tools for optimization. Excellent.

SPEAKER_01 10:27

Thank you so much, Charlie. Really, really, really happy to see you unpack such dense content from that research note onto something that's so much more digestible. I'm sure my high school physics teacher is fainting, hearing me on this podcast, but but really, really interesting, especially when you talk about quantum, which is inherently probabilistic and breaking them down into sort of in into a more binary model to get the answers we need. So back to the probabilistic side of things on stochastic modeling. You discussed quantum approaches to Monte Carlo and potential relevance for pricing models and risk measures in your in your note. Where do you see credible experimentation and what's the hurdle from going from theoretical speed up to a real commercial advantage? And and I accept it's it's it's a big challenge, that question, but if you could help us out a little bit here.

SPEAKER_03 11:17

I have a feeling I might be doing a slightly different job if I had the silver billet answer to that. But let me just start off by saying that stochastic modeling is another really interesting problem domain, which is why we looked at it in the research note. And again, it's probably worth stating that there are quite a few different approaches. So we did look at things like random walks or Markov chains, but as you say, in the research note, we really zoom in and we focus specifically on Monte Carlo simulation. And what makes that really interesting for us is we already have a proven theoretical speed up. What that means is we have a quantitude, quantum amplitude estimation, which gives us a quadratic improvement in sampling efficiency. And for all of you mathematicians out there, that means instead of needing N samples, we need root n samples to get our result. And on paper, that's incredibly compelling, especially given how heavily financial services rely on Monte Carlo methods. It's one of the most well-known use cases that could have a real impact on balance sheets. But in practice, it just simply isn't that simple. The circuit depth required and the number of logical qubits needed for realistic financial simulations are beyond the hardware we have today. And we are moving towards that fault-tolerant era, machines with thousands of stable logical qubits, but we're simply not there yet. And then beyond this sort of technical challenge, there's also the commercial challenge that your question alludes to. And for many assets, classical Monte Carlo simulation isn't so complex that we can't effectively estimate for it. So actually, that really limits the market for these solutions, for these quantum solutions to Monte Carlo. What happens is you start from exploring, say, quantum approaches to all derivatives to end up pricing complex rainbow or Asian options, which is still a relatively sized market, but only a small segment of the overall market for pricing assets in financial services. And even in those promising use cases, firms who are exploring this must also weigh this theoretical speed up against factors such as latency and error rates on quantum hardware, the cost of and difficulty of loading classical data onto quantum machines, or integration into existing risk and pricing infrastructure. So stochastic modeling is an interesting area for quantum computing. It might have one of the strongest theoretical use cases, but actually translating that into commercial advantage is not straightforward by any means. It may take longer to materialize, and therefore the possibility that practical benefits may actually fall short of the theory itself.

SPEAKER_01 13:43

Amazing. I'm gonna take that one away as simply not as simple. Because the last section, for anyone who ever complained about a podcast not being technical enough, that was for you, the segment. But for others as well. So a lot of asset managers who are mid-sized, who may not have very big sort of quant teams overall, and mathematicians and experts looking at this. How should they position themselves in this market? What is one low regret action they might take in the next quarter or the next year? Is it hiring a quantum physicist or just ensuring the legal team knows how to read a quantum vendor contract? What would you s what would your advice be to those firms?

SPEAKER_00 14:21

So I was lucky enough to attend the IA's wonderful MTech Global event just very recently. And interestingly, one of the speakers there, talking about AI, said that the UK is kind of famously not really a leader in the tech itself. I think the point is that we're brilliant at tech adoption, but less good at the actual underlying tech. But I did chuckle to myself when he said that, because although we are maybe not in some other technologies, we're absolutely leading the pack in quantum computing. Certainly up there amongst the top two or three in the world for the quantum ecosystem that we have in this country. From government through academia, the quantum startup and scale-up landscape, and looking beyond just the tech itself into sectors interested in innovating and adopting quantum computing, such as the financial services industry, alongside transport, telecoms, and others, the UK is really in such a strong and vibrant position right now. And although that's super exciting, I get that what I'm saying almost certainly does feel a bit abstract here. It's great that we have all this research going on and interest in that research, but what can a mid-sized asset manager do right now? So for me, developing awareness and capability is key at this stage. And there's a couple of reasons for that. Not least that quantum computing really is still not at a stage where you can expect to reliably deploy solutions. You might have heard lots of interesting use cases, Charlie's been talking about some of them, and also experiments going on, but the tech really is still relatively immature. So nobody that I'm aware of, anyway, is really even close to deploying a full solution yet. I know from many, many conversations that AI and quantum do tend to get conflated a bit. I think they're both seen as transformational technologies, and I guess it's really easy to see them as quite similar. And to be fair, they do also interact with each other, and there's a strong interplay or convergence in some use cases. So it's a very easy mental step to take, but they're not the same at all. AI is a general purpose technology that can be deployed in a vast range of different scenarios. Quantum computers are quite a lot more limited in scope, at least for the foreseeable future, and will only be able to solve a limited set of mathematical problems as far as we know. The thing is that we know that some of those mathematical problems are really important in some key areas. So we're pretty confident that when it's working properly, when we reach that fault tolerance era, it is going to be a transformational technology. So an example which is quite far from finance, but does illustrate this really well, is in simulation. So right now we use AI to simulate drugs or new materials, maybe new materials to build solar cells or other net zero technologies, but at a molecular level, we need to understand what's going on within and between the molecules. And these interactions are quantum in nature. Simulating quantum interactions is really hard, or in slightly more technical language, really computationally expensive, unless you have a quantum computer. Quantum computers can inherently simulate quantum interactions efficiently because they have that quantumness built in. So sorry for that non-finance digression, but I think it's important to understand that quantum and AI are fundamentally different technologies. And the thing is that despite what I've said about them being relatively immature right now, quantum computers are evolving rapidly. Despite their reputation for always being 10 years away, this is genuinely and profoundly changing right now. So the key to not being left behind is to start understanding them as soon as possible. I think that if you haven't started engaging with the risk side of quantum computers yet, that's actually a really wise place to start. The NCSC guidance and recent G7 SEG, so cyber expert group statement on the topic are great places to start and a great in to understanding why this is an important technology. So looking at the differences between quantum and AI and thinking about some of those early use cases that we're seeing come through, for example, by reading Charlie's paper on quantum applications in financial services, would be a really great first step. My great first step would be listen to this podcast. Shameless plug-in there.

SPEAKER_03 18:24

And maybe if I could just add something on top of that as well, because Fan mentions the paper and actually it ends exactly with this topic on building quantum readiness. So when I tend to think about this, before we even get to choosing a low or no regret move, I often try to push decision makers in organizations to consider their broader strategy and where quantum fits into that. So your low or no regret actions are informed by a set of questions, such as what assumptions have to hold for quantum to create value for your business? Where do you believe that value will come from? Is it from the early scientific breakthroughs or the ability to scale solutions once the ecosystem matures? And what we've actually seen from our engagement is that this differs from organization to organization. Some believe that roots to value materialize from first mover advantage, which is doing the hard science, the experimentation with partners from across the ecosystem, and developing algorithms that might prove valuable for use cases in financial services. And really, for firms that believe in this first mover approach, their low regret actions tend to look like partnering on proof of concepts, co-sponsoring PhDs and building that internal capability, or hiring quantum talent to begin exploring algorithms in use case fit. But there's also, should we say, another group that see the route to value likely to materialize from second mover advantage, fast followers, if you will. The focus here is less on pushing forward the underlying science, but engaging more deeply with quantum computer providers. So when I look at this group of firms, the low regret moves are different and they look more like senior leadership education, engaging more deeply with suppliers, and beginning to explore future hybrid architectures and integration points for quantum and classical compute. So for me, the real first low regret action you can take, and there's actually two here, so you have to pardon me. The first one is challenge yourselves to articulate your route to value and to be explicit about your assumptions. Then ask which actions create value across multiple future scenarios. Those tend to be the ones that you never regret taking, and the ones that build capability, optionality, and that readiness over time.

SPEAKER_02 20:34

So so far in this conversation, we've been focused on the upside, the opportunities presented by quantum computing. But we've also referred a couple of times to the potential downside, the risks, the uh the dark side of quantum computers. So let's get into that a bit because I know there are concerns out there that some of these potential downsides may in fact arrive more rapidly than the upside. So, for the benefit of our any of our listeners who are maybe not already familiar with the potential security implications posed by quantum computers, you know, what are the risks? What are the key issues at stake?

SPEAKER_03 21:10

Yeah, I mean, we're very happy to talk about the risks, but maybe I'll just set the scene a little bit before Fun, maybe you can come in and talk a little bit about that. To your point, there is a common belief that we'll see some of these quantum risks long before the benefits of quantum. And that isn't quite right. We're in a world, if we're sorry, if we're in a world where quantum risks are materializing, then we're also in a world where quantum computers are capable of solving incredibly interesting problems. And in fact, these timelines just diverge differently. So we may see early forms of quantum advantage in the next, say, 12 to 24 months. But the security risks, assuming no mitigation of them, are more in sort of the three plus year range. Now that doesn't reduce the importance of the risks, and organizations absolutely need to be preparing now. But it's important to frame risk and opportunity as parallel. Developments, not sequential ones. And probably with that firm, maybe you can pack the why now on the security side.

SPEAKER_00 22:06

Um, I feel like you're asking me to explain Shaw's algorithm on a 20-minute podcast. And I know I've got a PhD in quantum computing, but that's a tall order, even so. Joking aside, you actually don't have to understand the maths, at least on the surface of things. It's pretty easy to understand, which is great because I'm not an expert on this stuff, but I know enough to give a bit of a flavour of these things. So cryptography at its most basic is taking information, so think of it as a message that you want to keep secret. When you were a kid, you probably used the cipher I know I did, where you replaced every letter in your message with the next letter in the alphabet. So the word and becomes B-O-E. And I can see Charlie laughing at me because when we discussed this in the office before this podcast, I said everyone did this when they were kids, and he was like, nobody did this, you were a nerd. And unfortunately, a quick straw poll across the office did support his argument. So bear with me on this one. Going back to my definitely not nude nerdy use case example, in some kind of sense, it can be expressed as add one to each letter. It's clearly not a good code for anything except messages about how mum is being really mean. But in reality, the code that we use is not add one, it's add some huge number that's generated by multiplying two other numbers together. The security comes from the fact that you can make that multiplied number public, safe in the knowledge that if it's big enough, all currently known classical algorithms to factor it, so to break it down into the two numbers that you use to multiply together to get to it, would take almost literally forever to do that task. The huge problem is that when we have an operational quantum computer with enough compute power, which is sometimes known as a viable, hostile quantum computer, it will be able to do this factorization much, much more quickly. And what that means in terms of actual minutes, hours, or days is still a bit up in the air, but certainly we're looking at cryptography that's unbreakable today being breakable. But I'll just end with two very brief rays of light. So, first of all, not all cryptography relies on this factorization maths. Some relies on other maths, which is somewhat less susceptible to quantum attacks. And we do also have new cryptographic standards which are resistant to those currently known quantum algorithms. So we have defenses available and there are many smart people across the world looking for more.

SPEAKER_02 24:22

So in terms of how you communicate all of this to the industry, how are you trying to frame the right amount of urgency around some of these challenges without necessarily creating undue alarm?

SPEAKER_00 24:35

So there's really a lot of work going on here at the FCA to echo the work of others. The FCA is not looking to add new dates to the National Cybersecurity Centre timelines or add any quote unquote urgency here. I see our job as making absolutely sure that the good work and important thinking being done by others is heard by the financial services industry and that the risks, as outlined by others, are communicated clearly. In other words, we echo and amplify others to ensure that awareness is raised. And the National Cybersecurity Centre is saying that CNI firms in the UK should have mapped all their cryptographic assets and done their planning by 2028. So that leaves us a little over a year and a half to do what could be, in some cases, a complex exercise. We're aware that it's a global effort and can make things, and that can make things a little more complex for firms operating in multiple jurisdictions. Happily, though, many international timelines are broadly aligned to the ones that we've laid out by the NCSC. I want to say though that there's a lot of good material out there to support efforts on PQC migration, so that's post-quantum cryptography migration. There's really good roadmaps and handbooks from reputable sources. And I'm pleased to report that several big vendors are also developing and publishing their own approaches to this as well. So if you're heavily reliant on third-party suppliers, you can certainly look to see what they're doing. And if you're not sure or not confident that it's enough, just ask them. Another thing I want to mention though is that generally not being it's generally not being reframed as a cryptography upgrade. It's not just a swap of one module for another. It's bigger than that, and that's for one big reason. We do have cryptography that will protect us against currently known attacks from quantum computers. But someone could invent a new one any time that may negate those defenses that we have. It is a constant game of one-upmanship. We have to set up new cryptography carefully in new ways that allow us to have more layers of defense or easily swap out one unit of cryptography that becomes breakable and switch in a new one. While that does sound a little bit daunting, and it certainly is a big exercise, and nobody's denying that, it's actually expected to lead to far better and more robust systems in the future. I guess what I see broadly across the industry is a strange mix of inertia, people saying that the quantum computing threat won't materialise, so there's no point acting, and also a little bit of alarm. And my response to this is really a bit similar to what I say to my cousins when I see them panicking about exams. You have a deadline set by a higher authority, in this case the NCSC rather than their uni department, and you have all of the materials that you need in order to act. So instead of focusing on the fear of failure, just create a revision timetable and do it. And above all, reframing it as an opportunity to get better at cryptography will really help with that motivation to get started.

SPEAKER_03 27:26

And I think that's a really helpful overview. I'd maybe just add a little bit on trying to get this balance in the messaging narrative right. Unfortunately, Fern and I have been working on this subject for a number of years now, so we've had a bit of practice and thinking about this. And Fern's already covered what the NCSC expectations are. But that providing of a set of timelines to help CNI industries navigate this transition has really been incredibly useful. It's not just about putting a date to action, but in terms of articulating urgency and not alarm. So it starts with the first guidelines of 2028, which is less than two years from now. And that may feel a little bit alarming. But the focus there is on finishing your planning. That means completing your cryptographic inventories, understanding ownership between you and your suppliers, and planning for your migration to PQC. And what I really like about that deadline is that it gets organizations moving. It asks organizations to begin thinking at a strategic level of managing change across the organization and takes a large time frame, change program, and breaks it into those first manageable steps. So that's the urgency actually that we need, not the alarm that organizations must migrate by 2028. But they do need to start to understand how they're going to do this. So the takeaway message from that is this: I think if you break down that migration journey into core phases, as is done by the NCSC, you assign dates to those core phases so that action can be driven by urgency, it means that organizations are not put in a position of alarm where the risk is going to materialize tomorrow. But the actions you take compound to prevent the challenges and concerns you may have as you move along that migration journey. Fantastic.

SPEAKER_02 29:06

Some very clear, practical takeaways for everyone listening there. And if you don't mind me asking, could you tell us a bit more about how the FCA is engaging with other important stakeholders on some of these issues, such as, you know, your peer regulators in in other jurisdictions, you know, the so-called big tech providers and others. How are you engaging with those stakeholders?

SPEAKER_03 29:28

Yeah, thanks. Perhaps the simple answer is that we've, well, really since we started the work, it's always been focused on predominantly ecosystems and networks, not independent actors or stakeholders. And if I think way back to 2022, I can't believe I'm calling that way back now, we're getting old. But we first published public research into quantum technologies, and we did so as part of the Digital Cooperation Forum, the DRCF, if you will. And in that paper, we explored a whole suite of quantum technologies from the perspective of cross-cutting, cross-sector digital markets. But then even when we started to zoom in on financial services and we think about our 2024 publication with the World Economic Forum, we brought together over 40 industry leaders and 20 or so international financial services regulators to consider and agree on a roadmap of actions that the sector can and should take to prepare for the migration to PQC. And even more recently, we've seen this international momentum continue. So, as Fern mentioned, the FCA is part of the G7 Cyber Expert Group, which has now produced two different communiques and statements on quantum security, one last year and one this year. And please do go check those out as well. And really, that's that harmonisation, and we we see that, and we we believe that that will continue to be critical in supporting organizations to migrate to PQC. But really, when we research and when we are engaging on all emerging technologies and not just quantum, but when we're speaking directly with tech firms of all sizes, so that's you know, startups through to SM SMEs that are scaling solutions and to big tech providers and institutional end users, that engagement is a core part of what Fern and I do and how the team and how we sorry as a team begin to surface some of these insights.

SPEAKER_01 31:08

Brilliant. Thank you so much. The UK government has committed billions to becoming a quantum superpower. We've recently seen the Quantum Leap announcement, where the government has shown inclination to becoming the first country to roll out quantum computers at scale. These are really exciting announcements, really exciting for the UK, especially given Fern what you heard on the panel about UK being slightly on the back foot on AI and other bits, and you often hear about all innovations happening everywhere, Asia, America. But quantum is really a place where we can shine. How does the FCA's early engagement on quantum help position the UK as a place to innovate responsibly, especially without regulating the tech itself in this case?

SPEAKER_00 31:58

Yeah, so I completely agree with you, Shruti. And I want to start by saying that the positioning by the UK government has been phenomenal and really allowed the UK to exploit all of the best things that it can bring to the table, such as a world-class university ecosystem. And it's actually been running, this government support for quantum has been running for many years, and it's exactly this proje uh program that funded my PhD, for example, and countless others as well, and has materially pushed the UK into an incredible position when it comes to quantum computing, and as an aside, other quantum technologies as well, such as sensing. So we're seeing a lot of startups and businesses now in the UK. And in fact, I was talking to the CEO of a quantum tech firm just recently, and he was saying that he really thinks there's very little difference between the UK and US when he thinks about his business, which is an incredible position to be in as a country. You're right to ask, though, as this tech begins to land into financial services and as quantum tech firms begin to work more on financial services use cases, how does the FCA's early engagement help? So it's been very well and good having a world-class research and startup ecosystem, but if you don't have use cases and investment that will fail or quickly be bought up by other players. And what we have here in the UK that makes us so strong is the city. The city can really provide some incredible, compelling use cases, really smart people to work on them, and genuine capital to invest in them. So the way that we see it is that financial services needs quantum. It has use cases where even incremental improvement could be incredibly valuable, and early adoption can provide huge advantage to them. But we also see that quantum needs financial services. Financial services can provide that real commercial use case, the scale-up capital, and the market legitimacy. So it's a virtuous circle, and that's what makes financial services so important, and that's what makes the FCA's role crucial in getting this right. The UK has all of the building blocks in place, the talent, the research, the firms, and the investment. So what happens next can depend on the clarity that can be provided. And that regulatory environment can determine where firms invest and ultimately who leads on quantum. Brilliant.

SPEAKER_01 34:10

We've got a new section for this podcast, which came in with popular, popular request. So we're gonna have to do a very, very quick, quick fire round for those who listen to the podcast, the first minute and the last minute. But that's not enough, let me tell you that. Yeah, so for the FCA, the first question is one quantum headline you think it's overhyped.

SPEAKER_00 34:27

So almost every year without fail, there's a headline that someone, often a researcher in a university, has broken RSA cryptography using a quantum computer. These claims get more and more sophisticated as the years go on. They used to take minutes to debunk, and now it's a few days or even a week, but they're always overhyped.

SPEAKER_03 34:44

Yeah, from my perspective, every headline that starts with the quantum revolution for me, I think it's really overplayed and misses the nuance of where we're at. It feels like every month I'm reading about a quantum revolution with no real detail or at best loosely tied to an archive paper. And listen, I'm not against getting excited, but I f I'd like to see more headlines about actual progress communicated in a more nuanced way and speaking to the detail. And that's gonna be the significant steps on the way. There isn't going to be this one revolutionary moment or breakthrough, so therefore I do not want to see that headline. And what's one area that's perhaps underappreciated? Oh, oh, this one's easy. Let me first and foremost say software and algorithms. Hardware gets all the headlines, probably to our point before, but without software, we're going to be left with a growing gap between quantum computers capable of solving interesting problems and use cases with no way of applying quantum to them. And a second area that I actually think needs a little more attention, I'm sorry, I'm breaking the segment here, but it's in line with maturity and scale, and that's that's around integration. We need to start getting real about exactly how quantum is going to fit into our architecture going forward. And that's that's going to be if we are going to benefit from the potential that it has to offer.

SPEAKER_00 35:58

So for me, I think the area that's underappreciated is that quantum can be used as a tool to solve problems that have never even been tackled before. So we do tend to think of it as the next evolution in computing, a method for doing things we currently do faster or more efficiently. And while that's true, it actually unlocks a whole new class of problems that have been too hard to think about before. I know it's a little bit of an abstract answer, but I think we've established that I'm a geeky scientist. So I'm comfortable embracing that fact and saying that if you can get your head around that concept, it's deeply, deeply exciting.

SPEAKER_01 36:30

And the final one, one thing you want every CEO, CISO, an asset manager or financial services firm to do this year.

SPEAKER_00 36:38

Oh, well, that's easy. Read Charlie's paper. It's called Quantum Computing Applications in Financial Services, and you can find it on the FCA's website. It's incredibly detailed, but also very accessible, I promise, and I do highly recommend it. But shameless self-promotion aside, actually, no, I'm just going to continue with that theme. As you begin to think about use cases and what you need to do to get started in your own journey, I'd love to for you to think about how you can engage with the FCA, how the FCA can support you. Um, and you know, think about whether you attend events that we run or communicate with us via the investment association. Uh, we'd love to hear more about how we can be useful in this space.

SPEAKER_03 37:18

And that's really annoying because you took my answer and it wasn't going to be uh selfless promotion about my paper. But I was gonna say always come and speak to us. If you're interested in learning more about quantum applications or quantum security, or you're doing something in this space, or even thinking about it, we want to engage with you, Fern, myself, and the broader team. But if I put that aside, for the CEOs, I'd really say define what the route to value, what or what route to value works for your organization, figure that out. And for CISOs, put that planning activity on migration into practice. Really that simple.

SPEAKER_01 37:54

Thank you. What a brilliant Friday morning chat for us. I know the episode name now, Charlie. Thank you. Quantum revolution, it is. But really, thank you so much, Fern and Charlie. And thank you for listening in and watch out for future episodes. And thank you, thanks.

SPEAKER_03 38:08

Thank you.