Singapore Management University, Tradeteq experiment with quantum computing-based credit scoring


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The university, which leads innovative research programs, and Tradeteq, a provider of data, technology and software for the trade finance industry, have partnered on a project exploring the advantages of a quantum system for machine learning applied to credit scoring for companies, per a press release. 

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The model will be implemented on both a quantum computer and through software that simulates quantum computing. SMU’s School of Information Systems will provide the testbed and laboratory for experimentation where Tradeteq will be able to test and improve its AI capabilities, which are already in use to provide accurate and up-to-date credit scores to small- and medium-sized businesses (SMBs). The project is supported by the Monetary Authority of Singapore (MAS) under the Financial Sector Technology & Innovation AI and Data Analytics (AIDA) Grant Scheme.

The project demonstrates possible advantages of applying quantum computing to the financial sector, with collaboration between higher education institutions, the private sector, and government schemes key to developing innovative solutions.

Quantum computing has the potential to be a transformative innovation in processing financial data. Quantum computers enable the simultaneous processing of multiple pieces of data by using the unknown quantum state of very small particles, rather than the classical use of transistors, as the basis of computing. The hope is that this could lead to far quicker processing times over standard classical machines.

Taking into account the growing volume and variety of data that flows through financial firms, quantum computers could enable much faster results, such as quicker credit assessments. If the SMU-Tradeteq project succeeds, it could show one of the first practical advantages to applying quantum algorithms to financial services. This in turn may incentivize other financial firms to experiment with the cutting-edge technology.

Collaboration between universities and businesses is an effective way to foster innovation, especially when backed by government grant schemes. Experimenting with new technological applications can be very costly due to the low likelihood of a successful result — namely a profitable and market-suitable solution.

But it’s easier for businesses to allocate resources to research and innovation when supported by government initiatives, such as sandboxes that mitigate regulatory compliance costs, or grant schemes that provide financial aid for developing market solutions. MAS’ AIDA Grant Scheme is one of many examples of the regulator’s proactive approach to nurturing innovation within Singapore. In addition, enabling partnerships with universities further promotes the fintech ecosystem, allowing skilled individuals from the education and private sectors to join forces and learn from one another.

As SMBs struggle to weather the economic slowdown brought by the coronavirus pandemic, experiments aimed at improving credit scoring methods akin to SMU and Tradeteq’s project have become more important so as to facilitate access to finance. Due to the fall in demand for goods and services amid the lockdown enforced across most economies, many SMBs are struggling to make ends meet, which is exacerbated by their reputation as risky borrowers — some lenders have suspended credit lines to them.

Further, US business loan approval rates have fallen sharply, from 15% in February to 4% a few weeks later in March, per data from alt lender Become. By leveraging AI — and perhaps quantum computing one day — companies such as Tradeteq can efficiently process large amounts of data to provide accurate and up-to-date credit scores, thereby facilitating SMBs’ access to much-needed finance.

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