In recent years, quantum computing has become a buzzword, sparking excitement and concern across industries including FinTech. Unlike classical computers that use bits as the smallest unit of data (represented as 0s or 1s), quantum computers use quantum bits, or qubits, which can represent and process multiple states simultaneously. Imagine trying to find a needle in a haystack—while a regular computer would search through the haystack one piece at a time, a quantum computer can look at all the pieces at once, finding the needle much faster.
This capability allows quantum computers to solve complex problems at speeds unattainable by today’s most powerful supercomputers. As this technology advances, with significant investments from both government and private sectors, the potential applications are expanding. However, for FinTech and payment companies, the emergence of quantum computing presents a significant challenge, as these supercomputers could potentially threaten the security systems that protect billions of transactions every day.
A recent report from Moody’s Ratings highlights the urgent need for a transition to Post-Quantum Cryptography (PQC), a process that promises to be both lengthy and expensive.
What is the issue?
The fear is that quantum computers could one day break the encryption methods currently in use. At the heart of this concern is the concept of “harvest now, decrypt later” attacks. These attacks involve bad actors collecting encrypted data today with the intention of decrypting it in the future, once quantum computers are powerful enough to crack current encryption methods. This is particularly alarming for the FinTech industry, where encryption is the cornerstone of securing transactions, protecting customer data, and ensuring trust in online financial activities.
The US National Institute of Standards and Technology (NIST) has recently unveiled finalized data encryption standards designed to withstand the power of quantum computers. These new standards are crucial for protecting intellectual property, classified government documents, and the sensitive financial data handled daily by FinTech companies.
The problem is rooted in asymmetric encryption, a widely used method in FinTech for securing communications, authenticating users, and protecting sensitive information. Quantum computers, when they become more advanced, could theoretically break this encryption, exposing valuable data to those with the capability to exploit it.
Why Fixing This Won’t Be Easy?
However, the transition to PQC is not without its challenges. The process is expected to be lengthy, potentially taking up to 15 years to fully implement across all systems. The cost of this transition could be substantial, with estimates drawing parallels to the Y2K bug mitigation efforts, which cost the US economy billions of dollars.
Additionally, PQC algorithms are more complex and require larger encryption key sizes, which could reduce system performance. This is particularly concerning for FinTech companies, where speed and efficiency are critical to operations. The transition will also require highly skilled IT technicians, adding pressure to an already strained talent pool.
Certain legacy systems, especially those embedded in hard-to-reach places like satellites or ATMs, pose another significant challenge. Upgrading these systems to support PQC could be technically difficult and costly, further complicating the transition.
Should FinTech Firms Be Worried Right Now?
While the threat of quantum computing is real, many experts argue that it is not an immediate concern for the FinTech industry. The timeline for quantum computers to reach the level of sophistication needed to break current encryption methods is still uncertain, with estimates ranging from five to 30 years.
In the meantime, FinTech companies face more pressing challenges. For instance, the industry is currently grappling with the transition to T+1 settlement cycles, which require significant changes to back-office operations. Compliance with evolving regulatory standards, the integration of AI-driven technologies, and maintaining cybersecurity in the face of increasingly sophisticated attacks are all high-priority issues that demand immediate attention.
Given these demands, some industry leaders suggest that while the transition to PQC is important, it does not need to be at the top of the agenda. The focus, for now, should be on meeting current challenges and ensuring that businesses remain compliant, competitive, and secure in the present.
Conclusion
The quantum threat is a significant concern, but it’s one that FinTech companies can afford to address in a measured, strategic way. The transition to Post-Quantum Cryptography will be necessary, but it doesn’t have to happen overnight. By balancing the need to prepare for the future with the demands of today, FinTech companies can ensure they remain secure without sacrificing their current operations. As the industry continues to evolve, so too will the strategies needed to keep it safe in a quantum world.
For now, quantum computing remains a future challenge, and while it’s crucial to stay ahead of the curve, it’s equally important to prioritize the issues that matter most today.
