Unless you’ve been living under a digital rock for the last couple of years, you can’t fail to have noticed the advancing march of the technology that’s ‘going to change everything’ – everything from how we work and play to how we eat and sleep (ok, so maybe not these last two … yet!). And yet whilst we wait patiently to be buried under the avalanche of 5G-driven innovations heading our way over the next few years, it’s fair to say that finance probably isn’t the first thing that comes to mind when most of us think about the joy of its myriad applications across our digital lives. But that may be about to change – for if there’s one space where 5G might be about to make a bigger splash, a noisier noise and a more impactful impact than others, it’s how we ‘do’ finance. We recently explored the incredible opportunities associated with RegTech, the role of Building Societies in today’s financial services market and the incredible rise of Banking-as-a-Service. Today we’re posing the question: 5G – the next big thing in finance?
An Introduction to 5G & Fintech
Finance, it has to be said, has had somewhat of a meteoric rise to digital fame over the last few years. Once a sector steeped in tradition and a reputation for … hesitation … in embracing our digital world, it’s done a pretty good job of playing catch-up. AI, Blockchain, Voice, WealthTech, RegTech and lots of other ‘techs’, have – once welcomed into the fold – propelled banking and finance to the top of the innovations leaderboard. And with barely time to catch its breath, along comes 5G, about to elevate it even higher – if it can surmount the prevailing global apathy and confusion that’s been hanging around this particular technology for some time now …
According to last year’s Accenture survey of nearly 2,000 mid-large enterprises across a number of industries, over 50% believed there were “very few” things which 5G will enable that they can’t already do with existing 4G networks. What’s more, fewer than 40% are expecting 5G to bring that “revolutionary” shift in both speed and capacity across their business. Hardly the enthusiastic first flush of 5G love! The good news – a year is a long time in technology, and since that report, it might be fair to say that much has changed both in expectations and eagerness – might. The optimists amongst us today are quick to talk-up 5Gs low-latency high-capacity perks that could drive the value-add real-world use cases we’d all really really like to see; whilst those who sit on the other side of the 5G fence hone in on precisely this lack of new use cases to date and what they see as a so-far tenuous business case that can come with a rather hefty price-tag.
But … the word is that finance can ill-afford to sit around to ‘wait and see’ how 5G pans out, eyes fixed on the horizon for those real-world use-cases that might do the convincing. Indeed, with industry influencers raising their voices about the bounties that 5G could and should bring the sector, is now really the right time to start planning for yet another transformational technology at the heart of banking operations? Yes! That survey we mentioned above also told us that despite the hesitation, 70% of respondents think 5G will give them a competitive edge, and they’d be right – but it’s about so much more than the much-hyped 5G speed. Sure, super-fast is super-nice – especially for the growing number of us who want everything yesterday. But the finance industry will likely find much more to sink their eager teeth into as it continues to deliver more and more services across an unstoppable digital macrocosm.
By leveraging the speed and capacity in this new wireless world, banks that have invested in the digital toolkit to propel innovation and transformation will very likely be looking to 5G to drive further innovation.With uncommonly broad reach, 5G will support the use of a whole host of emerging technologies that enterprise everywhere is keen to deploy – think VR, IoT, AR and AI – helping these to do what they’re meant to do, but better, faster and more reliably than most currently experience due to limited bandwidths and iffy connections. And to be honest, that’s just the tip of the gigantic 5G digiberg.
When it comes to finance, the advantages of being able to run a ton of parallel processes across a very complex ecosystem in real-time will be piquing the interest of even the most committed technophobe. But as with all new technologies, we can’t really see where things are headed until we get there – not without our handy crystal ball, but we can certainly take a stab at some of the 5G fun stuff that’s heading our way over the coming years, bringing even more innovation to the financial (table) and cementing its reputation as one of the big industry turnarounds of the last few decades. Let’s take a look at what’s approaching.
Ultra-low latency 5G – what it is and what it means for finance
Whilst speed is much lauded when it comes to the 5G conversation, it’s really the promise of ultra-low latency that we’ll likely see blowing the winds of change across the financial sector. Investments, payments, mortgages, trading, borrowing, saving and walking the dog (ok, maybe not … yet!) – true real-time mobile banking is being ushered in with ultra-low latency, and not a minute too soon. We’re not biased (honest, guv!); mobile is where we’re going to see these low-latency benefits delivering the biggest impact. But what exactly is low-latency? Defined as the time it takes for a device to send a command to a remote server and illicit a reply, latency with 5G is predicted to drop drastically from the 50 millisecond average on 4G to under one millisecond on your 5G device. Everything. Instant. Now. Or maybe even yesterday.
“5G has the power to transform when it comes to the Internet, connecting over a million devices every square kilometre, and with speeds of up to 20GB/s”
Ultra-low latency sounds fairly innocuous, perhaps something the 5G marketing department might dream up to peak your interest but with little value to offer business and commerce – but it’s anything but. 5G-enhanced technologies will drive big innovations that deliver the meaningful, value-add experiences much sought after by millennials and digital natives – in other words, those for whom life is nothing if not driven by the instant gratification 5G is promising.
The super-fast super-seamless financial experience powered by 5G
In real terms, ultra-low latency bandwidth means the real-time collection and delivery of information, something which paves the way for innovative new capabilities that add real value to the mobile banking experience; for example, big-ticket purchases (and no, we don’t mean Led Zep at Wembley). Spotted a car you’re ready to purchase right there in the showroom? 5G’s low-latency means your credit score can be checked, your loan authorised, your payment plan agreed and your direct debit set up – all from your smartphone, and all within minutes (if not seconds). Looking around your dream-home and ready to commit on the spot? 5G capabilities mean you’ll clear your mortgage application with your bank, transfer your deposit and take the house off the market – before you’re even out the front door.
… with instant digital payments)
Recent research has told us that 45% of global e-commerce transactions are executed on a mobile device. Key takeaway? It won’t be long before we’re throwing away our wallets and embracing a truly cashless culture. As 5G rolls out, and mobile payments become routine, we can expect to see increasing numbers of value-add innovations – think personalised e-commerce experiences, among others – that will ensure mobile payments add value to consumers and banks alike.
And there’s more when it comes to payments … when 5G becomes ‘the way things are’, consumers can look forward to the ‘micropayment’ – or the idea of paying only for what’s used rather than the ‘all-in’ method that currently pervades our lives. Think of it as a kind of digital pay-as-you-go. For example, we currently pay for our parking space/gym use/gig ticket for a set timeframe, rather than exactly how much time we use it for. Through the use of sensors (we wrote a great article on these last month) which can monitor how long we’re in a certain location, or performing a certain activity, and real-time, reliable connection to the cloud, real-time micropayments are coming to a phone near you.
… and elevated security
For anyone overseeing digital transformation and its many guises, robust security can’t be far from the top of the ‘must-do’ list. As increasing numbers of us are turning to our smartphones to ‘do’ finance, it’s hardly surprising that the cybercriminals are turning their attention to mobile. In 2018, mobile malware almost doubled on the previous year, with takeovers of mobile account not far behind, increasing at almost 80%. The result? Global fraud loss touched $31 billion only last year. But with a 5G future, it’s low-latency again that’s offering the soothing hand of reassurance.
Until 5G, latency has inhibited the use of emerging technologies across a whole range of industries. Ultra-low latency means that these technologies – particularly VR and AR – suddenly become ones that we can realistically and reliably work with – minus the issues that have caused many to abandon them, such as lag, flaky connections and cost. Both VR and AR are making inroads across the banking sector but need cheaper, more robust networks replete with low latency if they’re to make any kind of long-term, valuable impact. The high speed and responsiveness of 5G means that finally, multimodal biometric security procedures that rely on such emerging technologies are ready to go into full production. And it won’t just be the face, the iris or the fingerprint – how a customer holds their device to make a transaction made its debut on the security scene only last year, and we can expect to see new innovations in this area emerge as 5G rolls out.
And there’s more. The real-time super-fast processing of vast amounts of information will make it possible to bolster the security across communications. For example customer verification could occur on a cloud server instead of the customer’s device, minimising risk and ensuring more secure transactions and services. And because 5G enables exponential amounts of data to traverse across networks in real-time, it will amplify proactive fraud detection and prevention. For example, when a customer initiates a mobile payment, their bank – and that of the vendor – will be able to sweep through a whole range of data such as the transaction amount, the customer’s location, and the merchant’s ID, reducing fraud detection errors (irritating if you’re a customer just packing up your weekly shop when your card declined at checkout – and for the bank when they get my angry phone call) and increasing the detection of the genuine fraudulent activities.
The increasing demand for faster, better, more value-add digital experiences in the financial space is at an all-time high, and while there’s little doubt that industry is stepping up to meet these demands, the rollout of 5G will see the consumer benefit in numerous ways. From increased adoption of mobile banking, to routine micropayments, enhanced personalisation to reliable security, 5G will change how we save, spend, invest and manage our money – changing the financial landscape forever. If you’re interested in discovering how 5G will be impacting your business, and your customers, let’s get the conversation started!