Quantum computing is not a futuristic concept but a reality that will impact financial institutions and the security of their transactions. In this episode kicking off the third year of the podcast, host Anne-Marie Leake welcomes Nanci McKenzie, Payments Expert in the Research Division of the Federal Reserve Bank of Atlanta, to talk about their work as members of the Quantum Payments Project Team of Nacha’s Payments Innovation Alliance. Listen in to get familiar with the basic concepts of quantum computing; the benefits and threats to the payments industry; and what financial institutions should be doing now to be prepared and quantum-safe!
Related resources from the Payments Innovation Alliance:
Video: Protecting Payments in the Quantum Era: Prepare for Impact
00:21
This is Anne Marie Leake, vice president of communications for ePayResources. Welcome to the Payment Space.
00:29 Anne-Marie
Today, we welcome Nanci McKenzie, payments expert in the research division of the Federal Reserve Bank of Atlanta, and Nancy is also a former vice president of payments consulting with ePayAdvisors. Welcome, Nanci.
00:44 Nanci
Well, thank you for having me, Anne-Marie. It's always a joy to work with the folks at ePayResources.
00:52 Anne-Marie
Well, thank you, Nanci and I have been reunited through our work as members of the Quantum Payments Project team of Nacha Payments Innovation Alliance, which is our topic today. Now, Nanci, you are a gifted speaker, so I'm going to issue you a challenge. First, let me ask, have you ever played the game 25 words or less?
01:12 Anne-Marie
This is a game my family loves. It’s where you bid against the opposing team to see who can successfully describe something in the fewest words possible.
01:24 Nanci
Well, I am familiar with it, and I have to tell you, Anne Marie. You know me pretty well. It's difficult for me to keep something within just 25 words, but I am going to accept your challenge.
01:36 Anne-Marie
OK, so your challenge is doubly challenging because it's on a complicated topic. So, describe for us, quantum computing in 25 words or less.
01:48 Nanci
OK.
01:49 Nanci
Quantum computing uses quantum bits, or qubits, to process information in parallel, enabling faster solutions to complex problems beyond the capability of classical computers. How's that?
02:04 Anne-Marie
Wow. No, I didn't count.
02:07 Nanci
Well, I can guarantee you it's 25 words or less because…
02:07 Anne-Marie
Was that? Was that 25 words?
02:12 Nanci
I used ChatGPT to help me.
02:15 Anne-Marie
Ohh, I see what you did there. Your other Payments Innovation Alliance project team? Exactly.
02:21 Nanci
Exactly, because we're also on the cybersecurity and AI project team.
02:26 Anne-Marie
Yes, that's what our next episode will be. Alright. Very good, very good answer. So, as we have learned through our work together on this team, like all technology innovations, there's both benefits and threats.
02:40 Anne-Marie
Why is it important that financial institutions start thinking about quantum computing now and its impact on payments?
02:49 Nanci
Yeah, sure. So, let's expand a little bit on my 25 words or less because that was jam-packed full.
02:53 Nanci
So, just to unpack that a little bit, we need to just consider the way that we are looking at the processing of computers today.
03:06 Nanci
If you can recall, I know I am easy to remember this because I've been in this industry for a very long time, but there was a moment in the 90s that we were doing sessions to explain the Internet.
03:23 Nanci
We got to try to get that concept in our heads and wrap our minds around what is the Internet, how does this work? Where is this information coming from? How does it all flow? And really, when it came down to it, did you really need to know all of the intricate details about how the Internet worked?
03:46 Nanci
No, we just wanted to know that it was there. It was a new way for us to have resources and a place where we could easily go find data. No more card catalogs. No more asking the complicated questions to librarians of where can I find information are.
04:08 Nanci
On this, that or the other, it's now all on the Internet. So when it comes to computing.
04:14 Nanci
As you may also remember, in the early days of Internet, we would see at the top of the URL window HTTP colon forward slash forward slash. Then we moved into a new era where we needed to have additional security. So, we moved to HTTPS colon forward slash forward slash.
04:37 Nanci
Then we started talking about a new term called encryption. I say a new term because that was not in everyday common language discussion with fellow employees, coworkers, family, friends, right, encryption right. So current computers are still on that same encryption
04:57 Nanci
Now, is it secure? Yes, it's secure. What makes quantum computing different? Quantum computing relating back to quantum mechanics, which has been
05:09 Nanci
Discussed, investigated, researched and progressed for many, many decades already. One very important person that many people recognize the name of, Albert Einstein. He was one of them that was involved in the quantum mechanics. So, it's been going on for quite some time.
05:32 Nanci
But, quantum and quantum mechanics puts additional securities as well as speed to the processing of a computer. So, we can think about the fact that a regular computer is like a light switch. You turn it on, you turn it off, it's either a 1 or a 0.
05:53 Nanci
And a lot of people have understood, Ohh yeah current computers look at how programming is done by ones and zeros. Well, now quantum computing adds layers into that one and a zero. So, think of it as a dimmer switch. A dimmer switch which can have a different position and make a difference.
06:19 Nanci
In how the lighting is within your atmosphere at any point in time, so a qubit is what we're Speaking of when we talk quantum computers and
06:33 Nanci
That dimmer switch can be put in many, many different positions. Thus our encryption is going to be what I like to think of, Anne-Marie, as more of a layered approach.
06:47 Anne-Marie
Very good. And I know we're going to speak in a few minutes about some of the resources our team has been producing and in each of those we have spent a lot of time passing through those descriptions you just provided us and talking about what's the best way to illustrate those concepts. So, thank you for bringing those images to mind.
07:12 Nanci
So, Anne Marie, you asked me about some of the benefits and threats to quantum computing. So, let's just talk about that for just a minute. First off, when I'm talking about encryption, cryptography, and algorithms, start making some peoples eyes glaze over.
07:33 Nanci
But some of the benefits to this layered encryption is the fact that when we look at current computer computing, encryption can eventually be cracked. Is it easy to crack it?
07:48 Nanci
Figure out what is that code that allows me into the security measures of that data. It can be difficult. It can take a lot of time, but it can be done. The fact is that quantum computing, because of its speed, can crack the code in a very quick amount of time because it is looking at it in many different ways.
08:10 Nanci
Like I had said in my original description It's in parallel, so it's constantly moving, constantly thinking and constantly trying to crack that code with quantum computing and the additional algorithms it's going to make it much more difficult for them to ever be cracked. It would probably take hundreds of years to crack the code.
08:32 Nanci
So, a benefit is additional security to our data and that is really important in the payments industry since we hold a lot of very valuable data.
08:43 Nanci
Not only in the dollar amount terms, but in your personal private information type of terms, banks hold a lot of that very sensitive information. So that's kind of threats and benefits into one comment.
08:59 Anne-Marie
Thank you. When we discussed this episode a while back, you wanted us to call out the importance or the significance of encryption standards changing.
09:14 Nanci
Yeah. So, there is a organization called the National Institute of Standards and Technology or in other words, NIST.
09:22 Nanci
NIST was challenged by the United States government, as well as globally, because we have a global effort in quantum computing and they were tasked with coming up with those algorithms for the cryptography needed for quantum computing. And they've been doing that for some time.
09:45 Nanci
and last August in August of:10:11 Nanci
Are going to need to consider one of those algorithms for their quantum computers, but you don't have to have all of the algorithms. You just need to have one and be able to install it into your computer system. So, does that mean we all have to get new computers? No, we don't all have to get new computers.
10:33 Nanci
But that's why it's so important that we start preparing for quantum computing now. Because when you're talking about changing any type of a format in your software or any sort of upgrade to your programs, there's gonna need to be some consideration of how that is going to work and where those improvements and enhancements are going to have to go.
11:01 Anne-Marie
Thank you, Nancy. What additional action should community banks be taking now to start the process of becoming quantum safe?
11:11 Nanci
Well, that's a really great question, Anne Marie and, you know, to relate back to the project team that we are part of with the Payments Innovation Alliance. We have provided the industry one paper so far in relation to what is quantum computing and why is it important to community banks.
11:30 Nanci
And we are going to be delivering our 2nd paper within the next couple of weeks. So maybe by the time this podcast airs, that will list out the different action plan
11:42 Nanci
And the steps within that plan that Community bank should take. You know, I think it should be also noted that when it comes to quantum computing, if you are a listener of this podcast and you're wondering, well, when is this quantum computing gonna take place? Is it going to be at the end of the year or is it, you know, coming up some effective date?
12:03 Nanci
u might think well gosh, it's:12:25 Nanci
just got my house painted in:12:49 Nanci
So just kind of relating to the papers that you and I have worked on, it should also just be noted that under this podcast you can find some of the deliverables that we've worked on on the Payments Innovation Alliance project team. So, if I may, Anne Marie, I'm gonna start with taking what we have recommended to be part of your action plan as Step 1 and that's awareness and education.
13:17 Nanci
And as I've spoken with a lot of individuals within the financial industry in relation to quantum computing, again, a lot of times they're like going, I don't understand it. I don't know what you're talking about. I don't know what this really means.
13:32 Nanci
The important thing to know here is that if you're listening to us on this podcast and you don't quite still get it, the thing that you really need to do is make certain that someone in your organization does.
13:53 Nanci
Start asking the question and becoming more and more educated on what quantum computing is, what are their threats? What are the benefits, and what is it that we need to do within our organization to start preparing for quantum computing era and the importance of being quantum safe.
14:13 Anne-Marie
Absolutely. Gotta start with education.
14:16 Nanci
Absolutely. And gosh, where's a good place to get some good education? ePayResources, your payments association.
14:25 Anne-Marie
100% thank you for the shameless plug Nancy. So, the second staff, as I understand it from our work on the project team is identify and prioritize the crown jewels is that Right?
14:38 Nanci
That's right. And that's all part of your strategic planning. So, making certain that you got a plan in place that you have identified those crown jewels and what do we mean by that? The data!
14:53 Nanci
It's all about the data, right? Data is king. We need to know where our data is at. Do we have third party providers that are accessing our data?
15:04 Nanci
How are they becoming quantum safe? What is their steps in making certain that we're going to be entering a quantum safe era? What do we need to make certain is being done in all of the different areas where we have our data being held?
15:24 Nanci
So, making the plan, identifying and prioritizing where those points of contact of our data and the access to that data is definitely the next step.
15:39 Anne-Marie
As a former member of ePayAdvisors, I'm sure the next one is near and dear to your heart: risk assessment.
15:47 Nanci
It certainly is. You know, I don't know a whole lot of people that really get excited about a risk assessment or an audit, but you know me, Anne-Marie, I get excited about audits and risk assessments.
16:01 Nanci
Risk assessment is so important, and we need to really identify where we might be vulnerable and looking all through our organization is going to be critical when it comes to becoming quantum safe. So, the risk management behind this, this is going to involve not just one area.
16:21 Nanci
It's not just IT. We're gonna need to have all of the individuals that are overseeing the different areas of our organization have conversations in relation to the risks that we may be seeing when we're talking about moving into a quantum area.
16:41 Nanci
So, getting the risk management established in relation to quantum safe is going to involve looking at your current policies and procedures and how they may need to be revised, right?
16:58 Nanci
What are we going to need to consider in relation to additional security measures or additional training that we need to provide our employees and possibly even our customers and our Members? So that risk assessment is going to be
17:14 Nanci
Critical in becoming quantum era, safe and making certain that we are considering the operational requirements to stay up 24/7 365 to maintain all of the products and services that we are currently offering.
17:32 Nanci
It's a big consideration within your plan. Now, the next one that we should be considering too. And it really ties right into it is just adopting all of the quantum safe solutions that we are looking at when we're discussing about what NIST is suggesting in its post quantum standards.
17:52 Nanci
So, we can look to NIST and the recommendations that they already have out there in relation to the post quantum standards.
18:00 Nanci
And you know, we wanna just make sure we have a proof of concept that is going to be considering what we've got going on internally, what that payment flow is and where our data is actually going throughout the entire process of a transaction going through our system.
18:21 Nanci
And making certain that there is the additional security measures, which is that additional cryptography and the algorithms within that cryptography as the transactions go through that whole payment process, we have a really great diagram in our paper that will help individuals know and understand what that payment
18:43 Nanci
Flow looks like and where those places within that flow are going to be vulnerable to the extra security measures that quantum computing is going to require.
18:55 Anne-Marie
Well, it's a lot.
18:57 Nanci
It is a lot, but I can tell you this.
19:00 Nanci
I'm trying hard when I'm doing these different educational sessions such as this podcast and other presentations as being part of the quantum project team. We have been touring the country on a panel to try to get the word out to community banks and credit unions as well as our regional banks and our national banks the need for preparing to become quantum safe.
19:26 Nanci
I don't get deep into the technical. I keep higher level and I try to speak to it in a language people will understand, but some of the other people that we have on our panel are from IBM and they're graduates of MIT, and I don't know what they're discussing, but you know, again, as long as we understand that this is something that is
19:49 Nanci
In our future, then we'll leave it up to those experts that have the education behind them to know the details about how we are really, truly gonna become quantum safe.
20:02 Anne-Marie
Well, you just described very well the additional step of collaboration and innovation.
20:09 Nanci
Absolutely yes. That is the final step that we are suggesting that community banks and credit unions should be considering as they are planning and preparing to become quantum safe.
20:23 Nanci
Don't be afraid to start connecting and collaborating with the individuals necessary to understand all of the details and the technical requirements that are involved in this. You know a great way to become involved is looking at Nacha’s Payments Innovation Alliance and maybe becoming a part of
20:43 Nanci
the project teams, I can guarantee you I knew nothing about quantum computing when I started in the project team about two years ago. Now I am here speaking on it. Do I know all the intricate details about it?
20:58 Nanci
Absolutely not. Am I ever going to be at that level? Absolutely not, but at least I'm now feeling pretty comfortable about talking about it, and that's how you really learn. It's just collaborating and considering the new things that are coming at us that you know you can really take advantage of in your own career.
21:20 Nanci
The more you know, the more you're gonna grow.
21:24 Anne-Marie
Absolutely. And that's exactly why I joined this project team and the AI project team. I wasn't afraid to start from the baseline of 0 knowledge because I knew that that was the experience that would help me learn and then help ePayResources share that information with our members.
21:46 Anne-Marie
So, we've talked about some of the resources that the project team has published already, the White Paper that we have referenced and you've mentioned the 2nd paper that's coming soon.
21:56 Anne-Marie
And the video that was just published this week, Protecting Payments in the Quantum Era: Prepare for Impact, the video and the White Paper share a lot of the same information, but presented a little differently. I love the video because it's got really simple but vivid illustrations of the concepts underlying quantum computing, and it emphasizes those recommended action steps that we just talked about.
22:26 Nanci
Absolutely. And you know, I may also want to mention here too, Anne Marie, that with that second paper that we've got coming out very soon to be looking for it. We have a time period listed in there too. So, people have an idea of what the progress should look like in their plan in becoming quantum ready.
22:45 Nanci
ears, which would take you to:23:09 Nanci
Regardless if you're a community bank, if you're a credit union, a regional bank or really even a healthcare industry organization, every organization like I said that is containing consumer data needs to prepare for quantum and this is also, you know, let's just think about your own personal life.
23:32 Nanci
You've got your cell phone plan, you've got your own personal computer you may have a connection with maybe your insurance company or your mortgage or, you know, a car loan. All these different areas where your data is living, and all of those individuals that need to make certain that they are quantum ready too, because
23:55 Nanci
as we've mentioned, Quantum is very fast and can do things very quick. We need to be prepared as a country too so that we can protect ourselves from being attacked from bad actors in international locations.
24:15 Nanci
So, it's taking a huge effort of all industries to become quantum prepared, safe, ready.
24:25 Nanci
And it is so very important because yes, it will give us some benefits and I haven't really touched on those benefits. So, if I can just take maybe 30 seconds to touch on one really important benefit.
24:35 Nanci
One huge benefit is that quantum, as I've mentioned, is really, really fast, so it's going to be able to determine what the activity is for Anne-Marie versus Nanci.
24:50 Nanci
In relation to our normal activity, and if it's something that is going through our system and we'll consider our financial transactions as just an example, is it normal for Nanci to be having these types of transactions go through her account, yes or no, it can give us this in an instant.
25:10 Nanci
rules, which are effective in:25:26 Nanci
The monitoring possibilities are going to increase exponentially well because of the speed and the ability for it to determine if these are typical or are they unusual for particular individuals, not just the institution overall.
25:48 Anne-Marie
Thank you for adding that. That's very important.
25:50 Anne-Marie
My last question for you, are there any other sources of information you would recommend for folks who want to drill down into the technology of quantum a little bit more?
26:02 Nanci
Absolutely yes. As I've mentioned, NIST, the National Institute Standards of Technology, they have also got a number of deliverables to help individuals understand the details about quantum computing.
26:20 Nanci
The importance of quantum computing, the steps that you should be considering when you're putting in your plan, your strategic plan. NIST is a wealth of information on becoming quantum safe. I know there are some other organizations that may be offering some deliverables too
26:40 Nanci
But as Nacha’s Payments innovation Alliance continues to keep having the deliverables come out, you know we can relate back to our quantum project team
26:50 Nanci
and plans that we have already set for the end of this year and into next year on where we're going to be going with our deliverables, which we we're not going to stop, we're going to continue to keep making certain that our community is well aware of what quantum computing is and how you can stay quantum safe.
27:12 Anne-Marie
Yes, very much an ongoing effort, Nanci, Thank you so much for joining us today.
27:18 Anne-Marie
Sharing your incredible insight and helping us kick off the third year of the Payment Space Podcast, it's my pleasure to get to work with you again on this project team on the artificial Intelligence Project team, which will be our next episode together and we look forward to having you back soon. Thank you.
27:39 Nanci
Thank you so much for having me.