Ally Recognized by CIO 100 for Quantum Computing

• Dan Lemont
• Aug 17, 2023
• 4 min read

I can feel the buzz and the excitement in the halls here at Ally. You know the feeling — people are upbeat, there’s chatter among teammates. Just an overall positive vibe.

Our Ally Tech team has had some big wins and celebratory moments recently — we honored five amazing vendors in our first annual Technology Partner Awards, the team at Fast Company let us know we’re among the most innovative companies of the year, and now Foundry’s CIO has put us on the CIO 100 list (for the second year in a row).

Our CIO 100 Award Winning Project

Our submission to the CIO 100 showcased a proof-of-concept (POC) with vendors Protiviti and Multiverse Computing to help Ally develop computing capabilities that solve challenges using both classical and quantum computing power. Ally sees value in preparing to be ‘at the ready’ as quantum computing machines become more powerful. The project centered on financial index tracking, an essential application of portfolio optimization used by financial firms for asset management strategies or for creating and managing new financial products such as exchange-traded funds (ETFs). A POC is a smart choice for a team looking to invest wisely in quantum computing because it allows safe experimentation and testing that could eventually be deployed to customers. While there’s no current plan to deploy this capability to Ally customers, it allows the technology team to solve complex problems and run tests in a controlled environment, which is critical for accelerating innovation.

Here’s How It Worked…

Financial indexes often consist of hundreds of thousands of assets and an important task to make it practical to manage such portfolios is replicating the financial index using a limited subset of assets, known as cardinality constraints. Such constrained portfolio optimization is extremely difficult to solve using classical computing, and standard algorithms tend to have difficulty finding appropriate solutions.

Collaborating with global consulting firm Protiviti and quantum software development firm Multiverse Computing, Ally developed a way around the classic cardinality-constraint issue by using quantum annealing, a specialized type of quantum computing that is excellent at optimization problems. The team worked to construct cardinality-constrained portfolios that replicated the return of financial indices.

Quantum annealers focus on solving problems with a lowest-energy-state answer and may also be referred to as peak-and-valley problems of optimization. Annealers can be efficient by ignoring the peaks (in this case, investments that exceed constraints) and focusing on just the best valleys. There is no correct answer, just a reasonably best answer, provided in an incredibly small amount of time.

Using hybrid classical-quantum approaches, the project team built static portfolios that replicated, and even beat, the 1-year daily returns of both the Nasdaq 100 and the S&P 500 indices, while using only a fraction of the companies in those indices. This was accomplished using the latest Hybrid Solver system from D-Wave. The team then used the new algorithmic approach to build the replicating portfolios. This new algorithm can be used for managing ETFs with the benefits being the reduction of overhead costs for financial managers and keeping fees low for customers. We anticipate that this approach will be recognized as a significant innovation for investing tools in financial services.

What We Learned…

The key learnings of the project were vast, but primarily, we learned that quantum computing isn’t something that can be implemented with a flip of a switch. Practical usage of quantum computing is daunting and complicated, and no company can remain in a leadership position using the technology without extensive development and testing. Therefore, below are our key learnings that we continuously apply to maximize the possibilities of quantum and move the organization forward.

• Invest time early on to understand how to apply quantum computing within the industry and within the technology ecosystem, making sure there’s a real end-use business case

• Help leaders understand what quantum computing is and what value (power, precision) it could add to the technology portfolio; Develop messaging and visuals that non-Tech professionals can understand

• Lean into the expertise of internal subject matter experts and suppliers, like Protiviti, to drive problem solving

• Share processes and results with the larger technology community. This could be through case studies, scientific papers, media engagement or many other channels. You can read our jointly authored scientific paper here: Financial Index Tracking via Quantum Computing with Cardinality Constraints

Chief Information, Data and Digital Officer Sathish Muthukrishnan has said that the investment made now in POC projects like this will lead to faster, more secure implementations in the future — and that’s part of Ally’s culture of ‘seeing around corners.’

“We want to leverage the power of quantum computing to solve challenges found uniquely in financial organizations, but the benefits go far beyond our industry,” he added. “If you’re curious about quantum computing and the value it brings, now is the time to explore it and think through how it could benefit your customers.”

Testing and learning about this type of technology is paying dividends. When quantum computing takes off in financial services, we’ll be on the forefront and ready to take action to benefit our 11 million+ customers.

We’re honored to be recognized among the innovative companies of the CIO 100 in 2023. You can check out the list here: CIO Awards August 2023 — Foundry Events. I hope a few of these notes about our financial index tracking project in quantum computing for the CIO 100 encourages all of you to submit your outstanding projects and initiatives in years to come. That buzzy feeling and positive vibes of innovation for the future are hard to ignore.