Credit cards are an essential part of our everyday lives; they are used all around the globe to make payments online and in stores. While being almost identical to debit cards, the way credit cards work is much different. The key difference between the two is that credit cards use money from banking institutions, whereas debit cards withdraw funds from your own bank account. Another advantage that credit cards have over debit cards is improved fraud protection, but that doesn’t mean they are immune to it. Here’s where the new advancements in quantum computing are helping us combat various types of payment-related fraud that occur in the digital world.
Quantum computers function on a whole new level. To put it in perspective, a quantum computer can solve computational problems that an ordinary computer may take decades to solve. Fraud detection technology has existed even before the advent of new quantum computers, and it has worked to a certain degree. However, the application of quantum computing will change this sector forever. Datasets of colossal size can be instantly crunched with the help of quantum technology; this ability is very useful for financial institutions, as the banking industry’s performance relies on how effectively it can manage millions of transactions every day.
In 2020, Multiverse Computing, a Spanish quantum technology startup, found out that their quantum algorithm was 2% more accurate in detecting fraud than existing AI technologies that are predominately used by most banking institutions. On paper, 2% might not sound like much, but that number translates to millions of dollars saved from fraud. The company tested its algorithm on real credit card payments across the EU using an IBM quantum computer. Analyzing almost 300,000 credit-card payments, the company identified over 200 fraudulent transactions.
What is exactly is a quantum computer?
A quantum computer is a machine that uses quantum physics to perform computer operations. To be specific, these computers use the quantum states of subatomic particles to store information. Unlike classical computers that use binary “bits” (0s and 1s) to store information, quantum computers use qubits as a basic unit of memory. Physicists and Scientists have always turned to supercomputers to solve extremely complex problems, but here’s where most of these computers fail: they still use classical computer technology.
When phenomena described in quantum physics, such as quantum entanglement, are used to solve complex problems, they offer a drastic speed boost over classical computers. Since qubits can be entangled, revealing information about one qubit will reveal information about all the paired qubits. As a result, these qubits can represent different things simultaneously, allowing computers to solve a large number of problems quickly.
Applications of quantum computers in payments industry
Since quantum computers process large amounts of data at much greater speeds than classical computers, they can detect patterns of fraud extremely quickly. Aside from speed, these computers also offer greater accuracy. All of which is essential for the banking industry to function steadily, and this helps both consumers and merchants. For instance, classical computers face the challenge of “false positives.” This occurs when a computer algorithm incorrectly marks valid payment transactions as fraud. For merchants, this disturbs their business, and the card issuers deal with unhappy customers as well as weight of investigating these matters. By optimizing fraud detection algorithms with quantum computing, all these problems can be nearly eliminated.
Global credit card fraud trends & existing security systems
Many online platforms today employ various preventative measures to flag fraudulent transactions. These classical machine learning algorithms and behavioral analysis minimize the risk of fraud. Popular e-commerce websites like Amazon, eBay, and many other online sites. This also includes online casinos Canada that employ blockchain tech in order to facilitate secure, cryptocurrency transactions. By incorporating increasingly sophisticated algorithms, the fraud prevention systems found at online casinos ensure a seamless experience for their customers.
That said, due to the limitations of classical computers, they are bound to make some errors and are not always able to catch attackers, who are also innovating ways to commit fraud. E-commerce credit card fraud in the US alone is up by 140% in the past three years, making online sellers the main target of credit card fraudsters. It is projected that credit card fraud worldwide will surpass the mark of $46 billion. And this projected number is, of course, without taking the application of quantum computing into consideration.
Conclusion
The technology of quantum computing, despite still being in its infancy, far surpasses the effectiveness of the most powerful classical computers. Today, mega corporations are extensively researching quantum computing and how its widespread applications can transform various sectors, not just the banking industry. Tech behemoths that are investing in this technology include IBM, Microsoft, Amazon, Intel, Alphabet, and Nvidia, just to name a few. This shows a promising future, and it will be a force to be reckoned with in fintech.
