GoodLabs Studio Unveils Quantum Optimization for Central Bank High-Value Payment Processing
Toronto, July 12, 2024 — Today, GoodLabs Studio announced a significant achievement in quantum computing, revealing how advanced quantum technologies can address some of the most complex challenges in finance. In collaboration with the Bank of Canada and D-Wave Systems, GoodLabs Studio has developed a hybrid quantum algorithm that optimizes liquidity usage in high-value payment systems (HVPS) and solves an NP-hard optimization problem central to financial systems.
The recently published paper, "Improving the Efficiency of Payments Systems Using Quantum Computing," demonstrates how quantum computing can transform central bank clearing operations, particularly in systems like Canada’s Lynx, the U.S. Fedwire, Europe’s T2 and Singapore’s MEPS+. By leveraging quantum annealing, the research team has tackled the notoriously difficult problem of reordering financial transactions to minimize liquidity requirements—a challenge previously thought unsolvable at practical scales using classical computing alone.
Quantum's Role in Optimizing Payment Systems
One of the core challenges in HVPS is that each payment must be settled individually, often requiring vast amounts of liquidity to be held in reserve by financial institutions. Currently, the timing and order in which transactions are processed can lead to increased cost of funding, inefficiencies, delays, and even gridlock in the system. The central question is: how can liquidity be optimized without delaying settlement times?
GoodLabs’ hybrid quantum algorithm provides a groundbreaking solution. The research applied quantum annealing to explore all possible ways of reordering transactions. This is an NP-hard combinatorial optimization problem—similar to the traveling salesman problem—and typically grows too complex for traditional computers. Using quantum annealing, GoodLabs' algorithm was able to find average liquidity savings of approximately CAD $240 million per day, with some days achieving savings of over CAD $1 billion. Even more impressively, these savings were realized with an average settlement delay of just 90 seconds, making the system both efficient and fast.
A Commercially Relevant Quantum Solution
What sets this accomplishment apart is that it represents a tangible, commercially viable application of quantum computing in the finance sector today. While quantum computing is often seen as a future technology, GoodLabs has proven that today’s quantum hardware can yield real-world benefits when combined with classical computing in a hybrid approach.
“Despite the current limitations of quantum technology in terms of size and speed, our results show that hybrid quantum algorithms can outperform classical algorithms in optimizing liquidity in payment systems,” said Christopher McMahon, lead author and head of quantum research at GoodLabs Studio.
By solving batches of payments with quantum techniques, the team was able to reduce the liquidity needed by 1.4% on average. The algorithm outperformed current state-of-the-art classical techniques, providing reliable solutions under time constraints. This marks a significant step forward for the use of quantum computing in financial infrastructures.
Implications for the Future of Finance
This research has broader implications beyond just central bank clearing. Quantum computing's ability to address NP-hard problems suggests it could revolutionize other financial domains, such as portfolio optimization, risk assessment, and market modeling. As quantum hardware continues to improve, the potential for scaling these solutions to even larger financial datasets becomes increasingly feasible.
“The significance of this breakthrough extends beyond payments,” added Donald McGillivray, lead researcher of AI and quantum at GoodLabs Studio and co-author of the paper. “It represents a new frontier in how quantum technologies can be applied to optimize financial operations across the board, particularly in areas where classical computers struggle to keep up with the complexity and size of the datasets involved.”
Leading the Charge in Quantum Finance
GoodLabs Studio is positioning itself as a leader in quantum finance, showcasing how the emerging field of quantum technologies can provide solutions to today's financial challenges. The collaboration with the Bank of Canada demonstrates the power of public-private partnerships in pushing the boundaries of technological innovation.
As quantum computing capabilities evolve, the success of this project paves the way for further exploration into how quantum algorithms can solve other optimization problems in the financial sector, unlocking unprecedented efficiency gains and cost savings.
With this major milestone, GoodLabs Studio is proving that quantum technology is no longer just a subject of theoretical research but is rapidly becoming a tool for solving some of the most critical issues in global finance.