Ep 6 | Inside Banking's Quantum Future with Lloyd's Banking Clare Schramm Fergus

Transcript


[00:00:05] Dr Kris Naudts

Welcome to Time to Talk Quantum. I'm Dr Kris Naudts, neuroscientist and psychiatrist, founder of Culture Trip and co-founder of Firgun Ventures. Today, I'm delighted to be joined by Clare Schramm Fergus, managing director of transaction banking technology platforms at Lloyds Banking Group. Clare drives the modernization of Lloyds core technology platforms to enhance business and transaction banking services, future proofing the bank for emerging technologies from AI to Quantum. Over her 20 year career, she has led and grown global teams and delivered award-winning platforms at BT, Google and IBM. It's time to talk Quantum. Evident insights came out with a report recently that 80% of the world's 50 top banks are now engaging in Quantum. Now, they engage around the opportunity, but it seems even more around the threat, or the sense of threat. Could you talk a bit to us about what that threat indeed is for the banking world?

[00:00:58] Clare Schramm Fergus

Sure. I mean, you know, the whole promise of Quantum and financial systems is about improving efficiency of financial transactions, improving our price and risk modeling, shortening cycle time, more transparent and secure financial systems. But I think what's scary is the potential that, you know, banks don't necessarily need to be intermediaries in these kinds of systems in the future, right? And it really drastically changes the structure of our current financial systems. And that's really the existential threat, reshaping these financial structures that have existed for, you know, years and have built and evolved with modern times. You know, Quantum, you know, relies on, you know, relies on Quantum to encrypt itself, right? You know, we don't rely on authorities, there's digital tracing, there's more traceability, and there's the whole promise of making global trade faster and easier. But there's very much, I think, the disruption to the traditional processes, systems, controls, and most, I think, crucially, controls that we know. And that's really, really the threat. And I think for us, you know, we have to lean into the opportunity and also be equally as cognizant of the threats and defending against that. Yeah,

[00:02:11] Dr Kris Naudts

the fear of breaking encryption, of course, is there. I mean, how near are we and are we sizing up that threat in an accurate way?

[00:02:20] Clare Schramm Fergus

Gosh, well, I don't know if you were paying attention last month, a couple key papers came out, right? There was the paper that came out from Google, in which they said they needed to publish it in the interest of responsible disclosure, where they said, you know, they can run Shor's algorithm with 1200 qubits, that's scary. And then there was also the paper between Caltech and Berkeley, in which they talked about quantum computers can break crypto algorithms with just 10,000 qubits. Right. So it's kind of logical.

[00:02:51] Dr Kris Naudts

Yeah,

[00:02:52] Clare Schramm Fergus

it's getting it's getting closer to the quantum edge. You know, we were thinking of this as a 10, 15 year problem. Those two papers at the end of the month last month started to show us that this problem is maybe at our it's it's not quite at our doorstep, but it's a heck of a lot closer, I think, than we originally thought. And I think with so much investment and so much growth in this industry, right, you know, in the hit hit a peak, right. And it's great that there's been so much advancement, but it does mean that that quantum cliff, if you will, is kind of inching ever closer.

[00:03:26] Dr Kris Naudts

Most banks are getting prepared if a bank were not prepared, say, one of the major US banks is not prepared. Is that a cataclysm? Are we talking here about billions of dollars of losses? Or what is this?

[00:03:36] Clare Schramm Fergus

Well, this is a thing, right? I mean, you know, a quantum attack, you know, could have catastrophic impacts, right, throughout the supply chain, right? There's been a couple couple quotes around, you know, what the probability is quite high, we're looking at a third of a probability of happening in the next 10 years. And also, it could wipe out, you know, potentially trillions of pounds, right, or trillions of dollars or euros out of the global supply chain. I think the biggest thing is that a quantum attack would not just necessarily be localized because of the complex interconnected nature of our financial, you know, institutions and our schemes and everything, it would have global impact around liquidity and things like that. And that's quite scary, isn't it, right? I think, you know, obviously, you want to try to defend against that. And I think there's it's worth investing in, you know, if the quantum cliff ends up not happening, at least the best that you've done is you've improved and gotten ready, gotten quantum safe, right, you know, NIST has made the guidelines very clear, very easy for institutions and organizations like the one I work for to solve for. And at the worst, if quantum cliff doesn't hit, at least you've improved your security posture in the process. But also, if it does hit, you're prepared and you're on the front foot, right?

[00:04:52] Dr Kris Naudts

You'd say your organization is quantum ready?

[00:04:55] Clare Schramm Fergus

Yeah, we've gone through the NIST quantum safe, and we feel, you know, kind of prepared and compliant and, you know, really thankful for organizations for giving standards like that for organizations like myself to follow. Yeah.

[00:05:07] Dr Kris Naudts

How do we how do we avoid a two tier world with large institutions versus small institutions, the larger ones being prepared, the small ones aren't larger nations, smaller nations, some are prepared, some are not. What do we do?

[00:05:19] Clare Schramm Fergus

Gosh, I don't know if you can ever solve for it fully. But a couple of things come to mind, right? I'm a massive fan of digital public public infrastructure, right? I travel a lot to India for my work. And UPI is an absolutely amazing tool. There's also a similar concept in Kenya and other countries in Africa, right? These kind of things, digital public infrastructure can lower the cost of transactions and lower the barrier to entry, right? So I view that, and investments in that is a really great thing. It's really cool when you're in India in a remote place, you can pay by, you know, contactless. Whereas I don't know that you can say the same in some Western countries even, right? So I think there's some things for us to learn there. You know, I think obviously DeFi is another way to kind of remove, you know, the inequalities and the more support, I'm a massive fan of us leaning into that and leaning into stablecoin initiatives and the like. You know, we can look at, you know, we've already been kind of looking at regulations and risk posture and, you know, kind of shaping our regulations around risk and kind of becoming more tolerant of risk in some environments. And I think the regulators have shown that they're quite open to those kind of conversations with us. When it's safe and when it's quantified risk and everything, so we can kind of lower barriers to entry. You know, I think those are a couple of things that come to mind. I don't know that we'll ever hit a kind of full equality because the really the as of right now, the amount of money it takes to be able to pour your investments into, you know, kind of uplifting your technology to be ready and, you know, to be on the front foot. It's really quite a high barrier to entry right now. Right. But I think there's a couple of things we can do. I think there's things we can learn from, you know, more developing parts of the world where they actually are in some ways a bit more digital native and there's things we can learn and some of the ways that they're building things. I think because maybe they don't have the barrier of legacy infrastructure. There's some things we can learn there around how to lower the barrier to entry. Yeah. Yeah.

[00:07:17] Dr Kris Naudts

Some people would also argue that we need to treat quantum security as a global public good.

[00:07:20] Clare Schramm Fergus

Indeed.

[00:07:21] Dr Kris Naudts

Yeah. And need to work on shared tools, common standards, cross-border collaboration, those types of initiatives.

[00:07:26] Clare Schramm Fergus

I think at least good principles and cooperation amongst nations, you know, you know, we're starting to see that with AI and different postures towards AI, right? Quantum is kind of one step behind, right, in terms of becoming a part of the general vernacular. So I'm really hopeful that we'll start seeing some really good principles based approaches and some cooperation in this.

[00:07:44] Dr Kris Naudts

There's probably a lot to learn from the AI world, as you say, they are a little bit

[00:07:46] Clare Schramm Fergus

ahead. Indeed. They're just a little bit ahead in terms of the buzzword vernacular, I would say, for right now. Let's

[00:07:53] Dr Kris Naudts

maybe take a look at quantum indeed and investment banking. I mean, Europe is not, for example, doing too badly. They're like seven over the 15 banks, as they are called, active in quantum are in Europe. But the leader is probably HSBC, in general, you would say, or JP Morgan, maybe on the investment banking side. Would you mind talking a bit about what these guys are up to at JP Morgan, for example?

[00:08:12] Clare Schramm Fergus

Sure. Yeah. I mean, I've been following JPM, they've been working quantum for about 10 years. And, you know, they've done a lot with advanced financial models and, you know, that kind of a thing with quantum. I really like that they've leveraged the open source community a bit and they publish their libraries for error correction in quantum. I think if you are a groundbreaking in this space, there's a bit of a giving back to the wider community and helping to kind of uplift and build this capability. You know, we are dealing with technology here in quantum that's R&D mode, right? So I was really happy to see that JPMorgan and JPMorgan has always been, you know, kind of a big supporter of that ecosystem. HSBC, I paid attention to their big publish about like six months ago with IBM. They improved their bond price predictions by 34% using IBM Quantum in trading. I'm an ex IBMer. So, you know, I was always quite keen to see that that was quite exciting. HSBC also participated in the QKD network here in the UK between Oxford University and also BT, another company I used to work for. You know, so that was another, you know, initiative that's quite close to my heart and also getting at the how do we get on the front foot with the defense and everything, cyber defense around around quantum. I know they're doing a lot around like algo trading and everything, you know, that seems like a logical next step for them. And they can get, they're seeming to get incredible amount of increased margins at greater liquidity by utilizing quantum. So it's interesting to see where this where this field will continue to flow, right?

[00:09:44] Dr Kris Naudts

We always see it's the same in healthcare. You obviously certain certain players running ahead of the others in pharma, Spiringen, Omerheim, Novo Nordisk in banking, clearly at JP Morgan. Two thirds of the jobs in quantum and finance are at JP Morgan apparently.

[00:09:57] Clare Schramm Fergus

Indeed. Yeah. I mean, they've been pouring a lot of money into this and they have a whole R&D very focused ecosystem, which I think is great as a bank that they've been able to tap into that, right? Because we do have to remember this technology is still very much in research mode, right? So when we're deploying it, we're talking about kind of safe pilots, proofs of concepts, things we can demonstrate to the regulators and things like that. Working hands in hand with our local regulators in the UK, Bank of England and working with FCA around how do we demonstrate that we can do this safely and everything. So I think that's really quite cool to see that they've done that for us. At Lloyds, we've been working on quantum and the fraud space. We're starting to do some simulations, advanced simulations and portfolio simulations. So I'm really looking forward to seeing how that kind of grows as well.

[00:10:50] Dr Kris Naudts

I mean, there was an article actually at Bloomberg today, indeed highlighting the differences between JP Morgan and how active they are in quantum versus a Goldman Sachs who started early but then seemed to have lost a bit momentum. And it's a clear divergence and it's interesting. It

[00:11:05] Clare Schramm Fergus

is interesting. Yeah, I think, I think if you, I would be interested to see, to compare those companies, their IT investment. Because I think, you know, JPMorgan has always been one that has poured a lot of money into tech and has really led tech first, right? And kind of led with those propositions and seeing the value that that brings. So, you know, it's great to see, I'm a big fan of organizations like that. So it's great to see them reaping the rewards from it. Yeah.

[00:11:31] Dr Kris Naudts

Before we come to the UK and to Lloyds, indeed, I mean, what do you think of the other European banks, like San Paolo Intessa, BBVA, there's a number of them active? I don't know. Yeah,

[00:11:40] Clare Schramm Fergus

I've encountered it a bit less, I'll be honest. You know, we kind of, I've been benchmarking myself against you, the other UK banks and particularly HSBC, because because of their global reach, right, I think it makes sense for them and, you know, to be able to work in these technology spaces. And now we're starting, you know, as a largely UK domicile bank, we're starting to dip our toes into quantum and do some experiments and everything and demonstrate that. So I've been really kind of focused on that with always keeping an eye to the North American, you know, financial institutions. I think a lot of that, maybe that's just a bit of unconscious bias. I think a lot of the innovation ecosystem is really centered around North America as well. And so we are seeing some of that. I'd love to see a bit more coming out and a bit more sharing from some of the European banks and our European counterparts that are closer to home about some of the experiments they're running. Yeah.

[00:12:30] Dr Kris Naudts

Would that have been different in a new Brexit situation?

[00:12:33] Clare Schramm Fergus

It would have been nicer. It definitely would have, right? Because that would have been our peer group.

[00:12:37] Dr Kris Naudts

Indeed. Yeah. What does the UK government want? And what does it do when it comes to quantum?

[00:12:42] Clare Schramm Fergus

Well, the regulator is, you know, to assure there to assure our readiness and manage risks, right? And be the released a paper last year that was focused on the technologies they believe will have the greatest impact. And that included AI, DLT and quantum, right? So it was great to see that. It's great to see, you know, through PRA them taking strides around, you know, building sandboxes, working collaboratively. And my experience with the regulator has been it's very much a collaboration and a cooperation, right? They're there for a reason and they're to put safeguard rails to protect ultimately the business customers and consumer customers that we have. Right. So we're there to kind of show to them that we can use these technologies in a safe way. And I think that they've shown their openness to it. And I look forward to continuing to demonstrate that and test and learn together, really.

[00:13:35] Dr Kris Naudts

Bank of England is a good partner.

[00:13:37] Clare Schramm Fergus

Yeah. Yeah,

[00:13:38] Dr Kris Naudts

absolutely. I

[00:13:39] Clare Schramm Fergus

mean, you know, they've shown their openness, right? I think it's all about when dealing with these regulators, it's all about explainability from our perspective, right? They're not there stopping us. On the contrary, they're saying, you know, lean into this, right? We want you to lean into this, but they want us to kind of do it in a safe way, right? They exist for a reason. They're an absolutely vital part of our ecosystem, right? In all industries, right? And I really do look forward to working hand in hand because there's very much an open door there, what I've seen, to test and learn and to show. Yeah.

[00:14:12] Dr Kris Naudts

When we first spoke, you said you were already developing Lloyds point of view, I think is what you called it on Quantum. Would you want to elaborate a bit on that?

[00:14:19] Clare Schramm Fergus

Sure. Yeah, that's evolved. We're right now, we've been working quite heavily with IBM. There's been something published around some of the work that we've been doing in Quantum. This is really in the fraud space where we think it'll have a massive impact and we've seen some really green shoots from that early trial. We're now starting to extend that to simulations around liquidity and cash flows. In my world, my team has been working with both IBM and Google who are two of our strategic tech partners and both of whom I would consider Quantum leaders really in the space. And we've been running, really very much now in experimentation mode. We want to share what we've learned, share what we've learned about the technology, be open with the regulators, talk about what we found and continue to share more and continue to shape this as this technology is on the cusp of becoming a bit more accessible, I would say. Now, it's becoming a bit more accessible with the advances in technology from a Quantum perspective that, look, Google's got Quantum chips, right? So it is at our doorstep. You can get it in the cloud. You can get all of this in if you even just have a regular public cloud account. So it's now at the point where we're starting to operationalize that and we're gearing up for June to have a point of view on what we think. You know, as of right now, a point in time, point of view, on where we think it's going to have the most impact from a cash management and payments perspective.

[00:15:49] Dr Kris Naudts

Would you work with startups, with Quantum startups? Do you?

[00:15:52] Clare Schramm Fergus

As of right now, our ecosystem is really kind of limited to some of the leaders, right? But I always keep it in an eye to some of the startups, right? I think we can learn a lot from those communities and learn a lot about their capabilities. I think where we are a bit more inclined to want to work with one of the big established players is because of our regulatory obligations and everything. And that's often a lot of overhead that big organizations are quite well prepared for. Whereas Startup World is, you know, I kind of want them to move fast and break things and kind of do that so that we can take these great strides ahead and I don't necessarily want them to kind of be going through an explainability and things like that, right? You don't want them to slow down. So we've kind of been a bit less, I would say, in the startup. But I'm always kind of keeping an eye and through our partnerships, right? The startups that our providers are working with. You know, we've talked about IonQ and things like that. That's a partner of Google's, you know, who they partner with. We kind of use their steer around the ones that are kind of getting there and everything, you know, the ones that are that are making great strides.

[00:16:54] Dr Kris Naudts

And within the UK banking ecosystem, of course, we talked about a few. How are the other high street banks doing such as Barclays or NatWest? Is that same level of activity as well?

[00:17:04] Clare Schramm Fergus

I've been seeing experimentation. I've seen a bit from NatWest, you know, do some experimentation in quantum and everything, same ecosystem partners as us working with IBM and everything, right? You know, I'm glad to see the leaders and I've just really seen some little experimentation here. But I think it's good. I think everyone is doing it, whether they're publishing it yet or not or socializing or not. And I think we should also be mindful to not just socialize our successes. Sometimes it's also okay to socialize if it just doesn't work for us, right? I, you know, quantum up until, you know, kind of really this year, it was kind of financially inaccessible for all but the big multinational investment banks, right? Now with the advancements in the technology, the price is starting to come down. It's becoming more commoditized. It's available in the public cloud. Now it's getting more accessible. But I think we should also be not afraid to publish where we tried it and it didn't work. Yeah,

[00:17:57] Dr Kris Naudts

exactly. Because

[00:17:58] Clare Schramm Fergus

it's a point in time. Again, as we always kind of say, these are R&D technologies. It might not work now, but it might work later. But I think that also feeds the ecosystem as well. So I would like to see a bit more of that as well. You know, don't be afraid to say if we tried it and it didn't work great. You know, it just wasn't for us right now. We couldn't find a use case for us for right now. That is how we really start to move the ecosystem forward. How

[00:18:21] Dr Kris Naudts

many people work on quantum in Lloyds at this point, you would say?

[00:18:25] Clare Schramm Fergus

A relatively small group, a relatively small group. Yeah, within the tense 20s, I would say, work on quantum and not necessarily 100% of their time, right? It's largely something that, you know, I have an innovation organization that focuses on quantum. We have a group innovation organization that supports orgs like mine that, you know, gets us access to these groundbreaking technologies and everything connects us with the right vendors and steers us to do it in the safe way. So I would say it's relatively small and relatively nascent for right now. And if it really does take off and we really see a good benefit and it makes economic sense, I could see in the next couple of years that really growing exponentially. I mean, as of a couple of years ago in the bank, we didn't have that many people working in AI. We had a lot of data scientists. I think we've always had a lot of data scientists, you know, in the banking world. But now we've got hundreds of AI folks, right? So I could see quantum going in that slope as well.

[00:19:21] Dr Kris Naudts

Yes. Yeah, interesting. I mean, because of course, there's quantum talent shortage. Indeed. So it might be hard when you want to scale it.

[00:19:28] Clare Schramm Fergus

I mean, we've been focusing right now on training, right? There is an awful lot of training out there. I'm really quite impressed by a lot of the, you know, big companies, big players like IBM's and Googles of the world. They make all of this open. You can get free quantum compute time from IBM. I think that's great. You could try out Qiskit. You know, I think it's really, really cool. And I think it's wonderful that these organizations that are large enough and have the resources to be able to provide this training for free are doing that. And I've been trying to encourage my team to lean into it and learn it. I've been trying out Qiskit myself. You know, I'm a massive fan. I think I've got an upskill as well. So I really appreciate that they've kind of lowered the barrier for training as well because it is quite a very new technology and you could go back to school for 10 years and probably to get a PhD and still not know everything there is to know about quantum, right? So I think it's great.

[00:20:21] Dr Kris Naudts

Yeah, sure. Do you have any insights in how the fintech world is approaching this? The new banks?

[00:20:26] Clare Schramm Fergus

Oh, gosh. I've seen a bit less I would say from the fintech world in terms of quantum. You know, I've seen obviously like Coinbase has done a bit, right, in that space. But from the other fintechs and particularly UK based fintechs I haven't seen a lot yet. So if they're doing it, you know, again, it might be a case of they're not publicizing it a whole lot. But if they are doing it, I do also wonder if it's economies of scale kind of a thing, right? Because it's now only just now become accessible to large organizations like the one I work for. Fintechs will say they have exponential growth in terms of customer volumes. A lot of them profitability wise are kind of various points on the curve, right? And this still is a technology that requires a significant amount of investment or a significant name in a significant tech partnership. And I think traditionally the fintechs haven't really partnered with the IBMs and Googles of the world, right?

[00:21:22] Dr Kris Naudts

Yeah, this is true at the same time. They're more open to innovation.

[00:21:24] Clare Schramm Fergus

Yeah, they're more open to innovation. I haven't seen a whole lot yet. I'm sure it's out there, right? And I do know there's a fair bit of it in the open source world. So I do see bits and bobs of that, but I'll be paying attention obviously, right? You know, share more. I think that's a big thing. You know, I like to share. I think we should all we can all benefit from sharing more. Do

[00:21:43] Dr Kris Naudts

you follow at all what happens in China and quantum finance?

[00:21:46] Clare Schramm Fergus

Oh, gosh, of course. I mean, China was the first to crack RSA, right? If I was being bullish, I would say they're going to make strides, massive strides in quantum, right? If we're worried about breaking quantum encryption and things, I would be keeping a close eye to China. You know, China has reversed the course in terms of being very closed ecosystem of late. You know, they open source deep seek, right? Their AI models are all open source now, right? They've open source chip designs, things like that. So we've seen a real sea change in the last couple of years, I think with China, and I'm glad to see it. I'm glad to see them also leveraging the open source community to publish and share and see the mechanism that that provides that that's a very apolitical organization, right? And it's really consortium of individuals. So I think quantum is really, you know, I know in China, they're pouring a lot of investment in it and I'm hoping to see more. I'm hoping them just to participate a bit more in the open source community and we'll start to see and use that as a pure playing field, an apolitical, even playing field for some of their innovations to make its way across the borders as well.

[00:22:55] Dr Kris Naudts

Yeah, there is like a company like SpinQ that's already having computers in about 30 or so countries. Yeah, I mean,

[00:23:02] Clare Schramm Fergus

definitely in like the Southeast Asian countries and everything, right? You know, they really can take a foothold quite easily and everything and then kind of expand to the West from there, right? I mean, Alibaba cloud expanded that way, right, and now that's one of the big cloud providers. So you see it as

[00:23:17] Dr Kris Naudts

a source of excitement, not so much a source of

[00:23:19] Clare Schramm Fergus

security. Yeah, well, I think, yeah, I think just because we're seeing a sea change, I think we do need to be mindful, right, of, you know, that this is a, you know, we do need to be mindful of the real security threat that this poses and that in every application of it, there are good actors and bad actors, right? And there will be people pursuing it from an academic and a, you know, purely knowledge based or a money making perspective. And then there will be ones who will be pursuing it from an exploitative perspective and everything. I think we have to keep our eyes and ears open and encourage, if we don't encourage the sharing, I would rather know, you know, and, you know, state the openness to share, right? And you can always do it via even forums like the open source world and academia and things like that, right? Invite people to participate more. But we do always have to keep an ear to the fact that there are adversaries, right? So I'd be very, very mindful of that.

[00:24:12] Dr Kris Naudts

Okay, so China aside, something that we haven't yet talked about, but I want to ask you as well, is how exposed do you think Bitcoin is, Ethereum, Solana?

[00:24:21] Clare Schramm Fergus

I mean, good question, right? Well, up until the papers of about a month ago, we were thinking 10 to 15 years to break ECDSA. Yeah, I don't know. Might be a bit quicker than that, right? You know, it really does. The Bitcoin encryption algorithm really does need, you know, hundreds of millions of qubits, right? In order to break the encryption algorithm, right? So I think we are, you know, we still have a bit of time, but it is marching ever faster. And I think one of the biggest things with Bitcoin is the risk of the large number of dormant wallets that we have out there, right? And the vast, what about a third of the supply they reckon is permanently lost or permanently dormant or whatever, right? It's someone had his own on a hard drive, like that, you know, famous guy that threw it out around his hard drive and has been searching for it for years because he's got $250 million in Bitcoin on it, right? But there's an awful lot of the supply that's locked in that, right? So how do we deal with upgrading the upgrading the blockchain when there's such a significant portion of the volume that's not actively traded on it?

[00:25:28] Dr Kris Naudts

How do we deal with that? Yeah, how do you approach it? I

[00:25:30] Clare Schramm Fergus

don't know if I have a good answer for it because removing it from the supply will just like decimate the price, right? And we already, you know, Bitcoin is obviously always quite volatile and has shown some volatility in price, but I think this would be kind of catastrophic, right? And might be reputationally quite difficult, especially as we're now approaching conversations about stablecoin and, you know, tokenized sterling and all these things that I think are like, great, I'm so happy that we're actually having these kind of conversations. I think it would do a bit of reputational harm to the technology as well. So I don't know if I have an easy answer for it. It's a tough one, right? Yeah, I think they are alert to it now.

[00:26:07] Dr Kris Naudts

Yeah, yeah, not me. What about these bigger quantum startups? Because as I understand, you wouldn't work with the startups have just come into existence, but there are some really big startups out there. Continuum is one. IonQ, Rigetti, D-Wave. Any views on those?

[00:26:22] Clare Schramm Fergus

I mean, personally, I'm quite bullish on Quantum, right? You know, I'm going to be paying attention to the Quantinuum IPO this year, right? You know, they're backed by Honeywell and everything, right? Massive manufacturers. So it'll be really interesting. I mean, these are high risk and high reward, right? If they really pay off, and if we really do unlock the value of Quantum, I mean, we could see this stock market breaching ever new highs and, you know, the first like multi-trillion dollar company, right, emerging out of the Quantum world, but it's still very volatile, right? And I think anyone that personally invests in Quantum stocks like myself has seen the swings and roundabouts, right? It is definitely something that as the technology is being developed, it's kind of, you know, maturing and kind of growing and everything. So, you know, kind of, you know, I would say caution, obviously, but I'm obviously quite optimistic in it, right? And I think it's really interesting where they're pushing things, right? Because these companies are really quite interested in pushing the boundaries, moving us along, and it'll only be once we get to kind of commercialize Quantum that we can really start unlocking it on a massive scale, right? So I'm all for pushing the boundaries and, you know, being a bit reckless and not necessarily leading with, you know, price and revenue in mind, but really driving it because this is still an R&D technology, right? So we need players in that space to kind of start shaping it, yeah?

[00:27:48] Dr Kris Naudts

We're talking indeed about investing in Quantum. Where would people go? This is not investment advice. We're not...

[00:27:53] Clare Schramm Fergus

Yeah, of course, of course.

[00:27:54] Dr Kris Naudts

But people have a number of options. They can invest, I guess, in big tech, but then it's not specifically attributable what the stock does to Quantum. True. We have some of these companies that have SPACs, and there have been quite a few of late. I don't know if you follow that at all, but they have five or six new SPACs being announced. Have you got a view on that?

[00:28:12] Clare Schramm Fergus

Yeah, there have been an awful lot of SPACs in this space, and I think that's because because of the risk, right? The vehicle is quite attractive. Quantum stocks, because we're still not sure if this is going to become commercially viable. Personally, I've been following those early stage companies that have kind of just gone IPO. I've been following, obviously, different parts of the supply chain. I kind of follow the manufacturing parts of the supply chain. Massive fan of Rigetti. I've been following them. I'm hoping that they will kind of evolve, but you can think of, if you're looking for something that might be a little bit less risk exposure, part of the supply chain, that is always going to be there, like the manufacturing piece or the chip manufacturing, or kind of a bit less exposed to some of the massive swings.

[00:28:58] Dr Kris Naudts

There's also some ETFs, some Quantum ETFs.

[00:29:00] Clare Schramm Fergus

Yeah, I've been seeing, a couple of years ago, I saw there was a first Quantum. I just remember talking to one of my friends about, we've got to get in on Quantum. There's someone released a Quantum ETF. This is so cool. If we could do investment management, investment advice for what to put in that ETF, I think it's quite a difficult space to manage. The fund managers must have a task, but it must be quite a fascinating world to be in to manage and to see this technology, and to prove it out and everything. There's obviously a fair bit of VC world around this still. All these things are still very early stage, but always a balanced portfolio. You always have to take a little bit of risk. I certainly take the risk on Quantum personally. What

[00:29:41] Dr Kris Naudts

do you think of hedge funds in Quantum? Hmm,

[00:29:44] Clare Schramm Fergus

I mean, I guess I kind of view because this is still something that's quite in the early stage. I really am a bit more favorable towards the VC community and everything fostering these companies because these are all and quite channeling them towards various aims. Hedge funds and wealth extraction, that kind of a thing, right? I don't think we're quite there yet in terms of commercialization of Quantum, and I think we have a ways to go in terms of the research and building out the capabilities and everything. And that's why I like to see really the VC world kind of backing this stuff and kind of channeling that because this is still very much growing. And it's also something that's very much in the public interest as well, right? As much as there's so much we could unlock with Quantum, we also have to keep in mind. We've been saying the adversaries and everything. There's so much of the public interest behind this that I would love to see all of our big brains that focus on growing the next big thing kind of focusing on that rather than kind of taking something. I don't think we're quite understanding how we commercialize it yet, I'll be honest.

[00:30:52] Dr Kris Naudts

You see it more as a VC play today, not so much PE or hedge funds.

[00:30:56] Clare Schramm Fergus

Yeah, I think because it's not fully commercialized yet. I mean, we've been doing experiments, but we haven't even been thinking about commercialization. We're just there to find out how the technology could work. For use cases, not so much business cases yet. Prove out the risk and all that kind of stuff. But monetization will be a whole other level and I don't think we're quite there yet necessarily. And when we do, obviously, then there will obviously be a space, but I'd love to see the research go a bit further.

[00:31:22] Dr Kris Naudts

Yes, okay. We're going to round up with a question on these prediction markets. I don't know all over the news, the Kalsies, the Polymarket. Yeah, yeah. Now it's news particular because Trump's family has been investing apparently. Indeed. In some of them. Now on Kalsies, they mostly talk about Cytochrome P450 or Shor's algorithm. Yeah. On the Polymarket one, they talk about the US government taking stakes in quantum companies and you can make bets on that. Oh, if I could make a bet. Gosh,

[00:31:50] Clare Schramm Fergus

I think, well, you know, the US government to take a stake in Intel, right? So a lot of this is, you know, you could see where it could go. I think I tend to think that US companies have taken a stake in a business because of its role in the supply chain. So I would be looking for, you know, like a chip manufacturer like Intel, right? And that is a very non-American move, right? By the way, to kind of back a chip manufacturer, it's very much what China does, obviously, but it's not, it's not a very American move. Gosh, if I were to say, I mean, if I think, and I think that a lot of the, you know, anyone who follows Intel like myself, you know, I was an Intel customer for many years following their swings in stock prices, one might say is it was it maybe more so motivated by the too big to fail kind of a thing rather than taking a vested interest in what they're building, per se. But I don't know, you know, just having been a follower of it, you know, the US kind of tends to take a stake in companies that are kind of on that teetering, right? But I do think, you know, if they were to take a stake somewhere that's in a part of the supply chain in the manufacturing supply chain, you know, people building the rigs or the equipment, you know, you know, a company like that, but also Intel is not purely a quantum company, right? They're also making AI chips, they're making general purpose chips, that kind of a thing. Could they take, could the US take a stake in IBM or Google? Whoa, that would be a whole other thing, I don't know. But I do think we should be thinking about these kind of technologies and what's in the national interest, right? And pouring a lot of our investment money from a national interest perspective in this, right? In the UK they've released the Sovereign Quantum Fund and things like that, right? I love to see that and pouring money into building the research at home out of, you know, your universities and your country and everything. And I would love to see a bit more of that and taking the national interest rather than buying stakes in companies and everything. But yeah, but could the US ever take a stake in IBM? Oh, I don't know.

[00:33:58] Dr Kris Naudts

That would be my prediction. I don't know where that stacks in the Polymarket. Yeah, you can check it out.

[00:34:03] Clare Schramm Fergus

It feels the most like intel, right? In terms of, you know, in the quantum world. But interesting.

[00:34:08] Dr Kris Naudts

Yeah, it is interesting to see what these guys indeed predict or what you can indeed bet on. Any final thoughts on your part on quantum and finance or Lloyds and quantum and finance you can choose? It's

[00:34:20] Clare Schramm Fergus

an exciting world, right? I have an innovation team as a part of my organization that's focusing on this technology and we're just at the early phases. We're just excited about trying something new, really. You know, we're excited about learning how to do something a bit differently and, you know, working hands in hands with, you know, the ecosystem, the schemes we're a part of, the regulators and the global markets that we're a part of to see how we can make sense of this technology and most crucially how we can protect our ecosystem and protect our interests going forward and work hand in hand on that. So I'm real bullish on quantum. I think it's great and I'm looking forward to seeing the pace. I can think back to my first ever conversation back when I worked at IBM about quantum back in 2018. I was talking with Ministry of Defense about quantum QKD, what later became the QKD project and, you know, early on quantum keys and encryption and everything and to see where it's come in those many years and then, you know, to look back in another eight years where will we, how much further will we be? We'll be with commercially viable quantum by then, I'm hoping. So, you know, from an idea and a concept and something that was really out of reach to now something that we are actively experimenting and in eight years feels like quite a quick time frame for this technology. So I'm looking forward to the next take.

[00:35:38] Dr Kris Naudts

Yeah, wonderful. Thank you very much for being on the show.

[00:35:40] Clare Schramm Fergus

Thank you so much.

EPISODE ENDS