Payments in Quantum world

Introduction

The world of computing is rapidly changing and new devices are being built with fast processing power. This progress of computing power will take a giant leap with quantum computing in business world. Quantum computing leverages the principles of quantum mechanics to process information in fundamentally new ways, which can not be achieved by classical computing. This technology has already been developed and has a potential to revolutionize banking and payments. Quantum computers can be useful in processing huge amounts of data and can be utilized in fraud and anti-money laundering detection, portfolio optimization, behavior analysis and real time routing of payments. However, there are some threats to the financial services industry due to processing power of quantum technology. This article is focused on the threats from quantum computing on payments.

Background

All the payment systems across the globe are secured by way of encryption. These encryptions work on mathematical formula which classical computers can not solve. Hence, the payments data (stored or transmitted) is secured. However, quantum computers have the potential to break these encryptions resulting in breakdown of payment systems. This poses a severe threat to the world economy as money movement is a backbone of the global financial system.

Initiatives

Considering this threat, few organizations have already started work on protecting the payment system. For example, the Bank of International Settlement (BIS) initiated project “quantum leap” along with central banks of France and Germany. They have done first phase of testing between the central banks with the objective of protecting payments from quantum threat. Also, G7 Cyber Expert Group has recommended actions to combat financial sector risks from quantum computing. NIST (National Institute of Standards and Technology) a major body in the US government has announced four quantum resistant cryptographic algorithms. All these initiatives showcase government intent to safeguard the payment system before quantum computing becomes mainstream or possessed by bad actors.

Threats and Impact

Even though the quantum computing is not being utilized at commercial scale, there are still threats which exist today. Some of the impacts which are associated with quantum computing (now or future) are as follows:

1. Harvest now decrypt later: Bad actors can harvest or get the encrypted data of payments and can decrypt them in future with quantum computing. This will expose the financial institute with loss of privacy of customer data including PII (Personally Identifiable Information). The repercussion of this loss is loss of trust, regulatory penalty and monetary loss.
2. Modification of payment: If bad actors break the encryption, then they can intercept the payment message and modify the payment instruction like beneficiary or amount. This can result in monetary loss as well as outage of the system.
3. Digital signature: Bad actors can use quantum computing to generate new payment messages by decrypting digital signatures and using them.

Way Forward

Financial institutions can start working on protecting their system from quantum threats by acting now. They can deploy quantum resistant cryptography in their systems. These cryptography do not need quantum computing and is available today. Financial institutions can use following factors while providing safety to their payment systems:

1. Take inventory of their encryption systems
2. Find symmetric and asymmetric cryptography
3. Prioritize mission critical systems
4. Look for external facing applications

Based on above factors and bank’s internal risk profiling, banks can start working on safeguarding their payment systems.

Reference:

Protecting Payments in the Quantum Era – What you need to know by Payment Innovation Alliance NACHA.

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