It might be a few years until we’re all using global fifth-generation cellular wireless (5G) technology, but experts at Deloitte say that this new iteration of wireless could make an impact sooner as we think. While consumers will likely notice that 5G enables lightning-fast downloads, connects millions of “Internet of Things” devices to one another, and removes the lag in their video chats, they may not realize that 5G will also be a critical factor in enhancing their banking experience.
Financial institutions are becoming more mobile, with many of those legacy operations opting to work more closely with FinTech providers to upgrade services, retain customers, and acquire new ones. The debut of 5G promises to add another tool that can aid such efforts. As mobile technology gets closer to the mainstream introduction, the potential 5G ecosystem for FinTech and mobile banking is gaining clarity. Banks and credit unions are still wrestling with the best ways to deploy mobile technology and to do so in ways that balance security, secure authentication, and consumer convenience. Machine learning and artificial intelligence are among the emerging technologies capable of boosting banking operations, including customer service, and preventing fraud. 5G offers the possibility of new technology that can help FinTech and financial institutions — technology that can be thrown into the existing mix to fuel ongoing digital efforts. For mobile banking to become ubiquitous, the development of 5G technology is paramount. 5G tech reduces latency and transaction times, which is key to ensuring the network can handle the number of transactions at scale.
When it comes to 5G, however, financial institutions and FinTech providers might find their hands forced in a way that’s more forceful than decisions about whether and how to deploy AI systems, according to observers. Arguing that banks, in general, have been “sluggish” in meeting the digital demands of consumers, Baskaran Subramaniam, global client partner of financial services at HCL Technologies, recently wrote that “this cannot continue for long.” He added that “as customer demographics change, there will be an increasing pressure on banks to deliver superior customer services through the channels their users prefer. The dawn of 5G will further force banks to undertake massive reforms in the way they use technology, for internal operations and customer engagements alike.” What does that mean, then? “Many familiar banking operations, such as payment services, will attain new forms extending to newer channels, including 5G smartphones, wearables, IoT devices, and virtual reality,” Subramaniam wrote. “The increased security and speed made possible by 5G will also revolutionize the capital markets, shortening settlement cycles considerably and removing latencies with real-time mobile trading capabilities.”
When it comes to FinTech specifically, instead of banks and credit unions, in fact, perhaps the main appeal of 5G at this point is not speed, but “ultra-low latency,” argued another recent analysis. “Defined as the time it takes for a device to send a command to a remote server and get a reply, latency looks set to reduce from 50 milliseconds on a 4G phone to under one millisecond in the 5G era. So at the very least, 5G will bring lightning-fast, real-time user experience to mobile devices, so much so that consumers will experience banking and payment transactions instantly on their devices. 5G will mean zero waiting time. That virtually zero waiting time will also bring other benefits to the world of FinTech, according to the analysis. Low latency “will become more critical in the short term as the use of third-party application programming interfaces (API) within banking grows, with third-party apps gaining access to bank databases to make transactions. That said, it seems unlikely at this point that blockchain and cryptocurrency will experience significant benefits from the low latency promised by 5G mobile network technology, according to experts and reports. But latency and other features of 5G do seem set to promote further use in payments, digital banking, and financial services via smartphones and other connected devices, including wearables. In 2019, an estimated 225 million wearable – and web-connected – devices shipped globally, according to a new report from Gartner, up 26 percent from 2018. That means, of course, that 5G will fuel the growth of the Internet of Things. The looming deployments of 5G come as financial institutions are focusing more on the (relatively inexpensive) cloud computing, which also increases what banks and credit unions — and FinTech, either on their own or in partnerships — can do with digital technology and product offerings. Still, we can’t assume that everyone has access to high-speed internet to take advantage of cloud computing, reads a new report on that topic. For many businesses and customers, 5G is the missing link.
Here are six surprising ways that 5G will be a catalyst for an optimized, personalized digital banking experience in the years to come:
The arrival of the high-speed, real-time data flow that 5G enables will help streamline cumbersome processes that often accompany big-ticket purchases. Find a car at the local dealership you want to buy today? 5G can speed up the whole process—from application to a credit check to personalized financing offer to approval and funds availability in one smooth, end-to-end experience. Want to secure a mortgage? 5G will help streamline the digital application process. By leveraging the speed and capacity in this new wireless world, banks that invest in tools to combine artificial intelligence, data, and 5G will be able to run many parallel processes in real-time. In turn, it could improve the speed and accuracy behind lending decisions and will optimize lending rates to match each unique applicant’s reality. And thanks to 5G’s high-resolution streaming capabilities, customers will have real-time access to video consultations with financial representatives – both virtual and human – who can help them make informed financing decisions.
Nearly 20 percent of senior millennials in FIS’ 2019 Performance Against Customer Expectations (PACE) survey said they’ve recently stopped using cash in favor of mobile payments. As 5G marches toward ubiquity, consumers will experience a newfound uniformity between their phone, watch, wearable, and connected car—to the extent that they can rely entirely on digital payments. The ease of use, combined with increased transaction speed and personalized offers, will make mobile payments more valuable for everyone involved. As 5G enables even more value-added innovations, it could help increase consumer confidence in fully digital payments and help sway more tech-averse consumers to reconsider their payment behaviors.
Customers may notice that 5G removes performance hiccups with payments made via wearables and IoT connected devices. Less visible but equally important will be all the enhancements that 5G brings to other transactions made with a mobile device. For instance, because 5G allows more data to travel across networks in real-time, it will enhance proactive fraud prevention. As soon as a customer initiates a mobile payment transaction, banks will able to more rapidly comb through data like geolocation, transaction amount, and merchant ID to reduce fraud detection errors. As a result, fewer legitimate mobile wallet transactions are being declined at the point of sale for (incorrectly) suspected fraud. In turn, banks gain the advantage of fewer irritated customers who stop using their card due to fraud prevention error.
In a pre-5G environment, security vulnerabilities detected within an app require an update, often including manual intervention from the mobile app user. With 5G, banks can update and add enhancements in real-time, without bugging the consumer. The arrival of 5G will also promote increased use of multimodal biometric security measures that combine nuances like a customer’s gait and position in which he holds a mobile phone to make a payment to validate a mobile user’s identity.
Direct-to-consumer banks have made it easier for consumers to the bank when, where, and how they want, and 63 percent of customers who use a direct bank report being “extremely satisfied.” Yet, there remain millions of people around the world who live in rural areas and lack access to high-speed broadband. As 5G becomes more prevalent and affordable, it will help enable a more luxurious digital banking experience through virtual reality-based customer service, financial advice and wealth management support—all of which could improve financial inclusion in historically underserved areas. Consumer demand for better, more seamless digital experiences is at an all-time high and continuing to escalate. And while many technologies already exist or are being developed to meet those needs, the increased bandwidth of 5G will invariably help financial services (among other industries) to step their game further up.
5G will also create a new ear of high-frequency mobile trading that will revolutionize stock market transactions. Fast buying and selling is everything in the stock exchange, and fractions of seconds can make vast differences worth millions of dollars a year. Given today's computerized and automated trading, 5G's reducing of latency to 1ms will prove irresistible to brokerage firms, so much so they will likely be among the first to install 5G's microwave radio links. That's not to say that there aren't potential use-cases for using 5G's super-fast data rates and ultra-low latency in FinTech for reasons other than creating faster user experiences. For now, it's mere speculation, but with vastly improved download and upload rates, advanced security measures relying on more layers of data could be used, such as more in-depth biometric verification. Instead of a fingerprint sensor or face/gesture recognition taking place on the device, all smartphones and wearables will have a real-time link to the cloud, so much more finely-grained device security could take place there.
Furthermore, if future devices offload all of their data – including files such as apps, photos, and documents, but also multi-app data on payments and even geographical location – financial institutions could make use of 5G's reliable connectivity and exponential cloud computing power to develop new products. For example, banks could use artificial intelligence, cognitive computing, and machine learning to develop personal banking assistants that scan all data in the cloud about someone's life and financial behavior to produce a daily spending limit. This kind of 'robo-advisor' service is already happening more bluntly in areas like portfolio management and investment advice, but an adequately personalized and private banking experience may have to wait until the 5G era. With the 5G network firmly established, micro-payments could be possible — this notion of paying precisely according to what is used, rather than the blunt way we pay now. For example, drivers pay for a car parking space/entry ticket for a museum/use of a pay-for WiFi hotspot for a set amount of time, rather than exactly how often it's used for. It's the same for web pages, which are increasingly littered with adverts; couldn't the reader pay according to how much they read? With the spread of sensors and devices when 5G kicks-off, and 5G's real-time connection to the cloud – as well as more ubiquitous payment technology and cryptocurrencies – real-time micro-payments, could become a huge business. While FinTech will continue to be disruptive in the 4G era, 5G will allow more connected devices, more automation, and increased use of the internet. As the IoT mushrooms, ever more advanced FinTech will provide frictionless, personalized payment technology, and even a new era of micro-payments as 5G creates a new era of ubiquitous connected devices.
5G’s capabilities cannot be separated from many of the other ongoing digital transformation issues the industry is already addressing. Factors such as the increased use of data through the use of analytics and artificial intelligence, the shift to real-time and person-to-person payments and mobile banking in almost every respect will all be significantly affected by the substantial step-up provided by 5G communications technology. As several commentators noted: The FinTech community will be further enabled by 5G technology. And while that could lead to partnerships as much as to disruption, it’s a factor traditional financial institutions should consider. Abbosh and Downes, in their article, recommend “an aggressive but measured approach” to planning for and investing in 5G today. “It makes little sense,” they say, “for companies in affected industries (increasingly, all of them) to bet on one particular technology or application. But at the same time, the old approach of waiting for new 5G-powered markets to emerge and jumping in later as a so-called ‘fast follower’ won’t work either.”