Explained: How quantum cryptography is leveraging principles of quantum mechanics to secure data to prevent financial frauds

In recent years, India has been witnessing a major surge in digital payment frauds. According to data from the Reserve Bank of India (RBI), the total value of digital payment frauds escalated to Rs 14.57 billion in the fiscal year ending March 2024, marking a more than five-fold increase from the previous year. Besides, a survey by US-based data analytics company FICO revealed that over 34 per cent of respondents in India reported losing money to scams via real-time payments. Notably, while fewer consumers reported losses in 2024 compared to 2023, the percentage of high-value losses (those exceeding Rs 8,00,000) doubled.

In addition to this, a report by BioCatch indicated a 101 per cent increase in reported fraud volumes in the first five months of 2024 compared to the same period in the previous year. Up to 40 per cent of these reported frauds were categorised as voice scams, underscoring the evolving tactics of fraudsters.

Such statistics underscore the pressing need for enhanced security measures and increased user awareness to combat the rising tide of digital payment frauds in India. Newer technologies such as quantum cryptography leverages principles of quantum mechanics to secure data.

“Unlike classical cryptography, which relies on mathematical complexity, quantum cryptography uses the fundamental laws of physics. A primary example is Quantum Key Distribution (QKD), which enables two parties to generate a shared, secret key. Any attempt by an eavesdropper to intercept the key alters the quantum states, revealing the intrusion and ensuring the integrity of the communication,” explained Dharshan Shanthamurthy, CEO of Bengaluru-headquartered firm SISA, which offers forensic-driven cybersecurity solutions for the digital payments industry.

Shanthamurthy noted that the integration of quantum cryptography into digital payment systems can address several security challenges.

“Quantum cryptography provides security based on physical laws rather than computational assumptions, making it resistant to current and future computational attacks, including those from quantum computers. As quantum computing advances, traditional cryptographic methods become vulnerable. Quantum cryptography, particularly QKD, ensures that any interception attempt is detectable, safeguarding data against both classical and quantum attacks. QKD facilitates the secure distribution of cryptographic keys, a critical component in digital payment security. This ensures that encryption keys remain confidential and integral, preventing unauthorised access and fraudulent transactions,” he said.

Implementing quantum cryptography in digital payments involves integrating QKD systems with existing payment infrastructures. This requires the development of quantum networks capable of transmitting quantum keys over distances relevant to financial transactions.

Additionally, payment protocols must be adapted to incorporate quantum-generated keys, ensuring compatibility and seamless operation. Broadly quantum mechanics provides a level of security that is fundamentally resistant to both current and emerging threats, ensuring the integrity and trustworthiness of digital financial transactions.

Recently SISA launched Post-Quantum Cryptography services to secure digital payments. The aim has been to give industry support to the government's quantum mission. “The UNGA (United Nations General Assembly) has announced the year 2025 as the year of International Quantum Science, this initiative by SISA is also in line with the the government of India’s national quantum mission to increase the skill resources in quantum technology."

“Quantum supremacy, the point where quantum computers surpass classical ones, is expected within the next five to ten years, with the quantum computing market forecast to reach $50 billion by 2030. These advancements pose a critical threat to the digital payments ecosystem, as quantum technology risks rendering traditional encryption methods like RSA, ECC, and DSA obsolete, leaving sensitive data and financial transactions exposed. Despite the growing urgency, many organisations remain uncertain about whether to invest and how to prepare for a quantum-secure future,” remarked Shanthamurthy.