5G and financial services


Financier Worldwide Magazine

May 2019 Issue

The advent of the fifth generation (5G) of wireless technology could be a revolutionary moment in the development of mobile internet connectivity. When they come online starting in 2020, 5G networks promise unprecedented speed, low latency and the capacity to carry huge numbers of connections simultaneously. Unsurprisingly, the imminent arrival of 5G is creating a buzz in the communications industry, the financial services sector and the wider world as it will allow companies to launch new products and services not previously possible, move into new markets and increase productivity.

Unlike 4G and LTE connections, the use cases of 5G will not be limited merely to mobile phones; it will be transformative in many other ways. With sensors being placed in everything from mobile phones and household appliances to cars and lamp posts, 5G will power the Internet of Things (IOT) and provide the infrastructure to carry huge amounts of data, allowing for a smarter and more connected world. According to Gartner, there will be more than 20.4 billion connected devices globally by 2020. Statista suggests that by 2025, there will be in excess of 75 billion connected devices worldwide, many of which will rely on 5G.

5G will also have significant economic benefits. According to CTIA, the rollout of the new technology will create three million new jobs and generate $550bn in economic growth in the US alone by 2024. However, it will come at a cost; Greensill estimates the total bill for 5G rollout throughout the global supply chain is likely to top $2.7 trillion by the end of 2020.

Better banking

Though the cost is high, 5G will be the catalyst for change and growth in a variety of industries, including financial services. 5G will require banks and other financial institutions (FIs) to significantly reform the ways they use technology, for internal operations and customer engagement alike.

While some FIs are beginning to embrace new technology, many others are still wrestling with the question of exactly how to become more mobile and technology savvy. The introduction of 5G will, however, change the paradigm for many FIs. Familiar banking operations such as payment services will attain new forms extending to newer channels, including 5G smartphones, wearables, IOT devices and virtual reality. Wearables are already becoming an important channel for mobile payments, and this is likely to increase as 5G becomes available.

Customer services will also be upended. Artificial intelligence (AI), for example, which is still in its infancy in the financial services industry – according to PYMNTS just 5.5 percent of FIs in the US currently employ true AI – will become more ubiquitous. FIs will be forced to embrace AI and other technologies poised to improve banking and financial services for customers, and improve both security and speed.

Early adoption of 5G may be one way for FIs and FinTechs to increase their market share, win more customers and drive value creation.

According to Deloitte’s recent report ‘5G: The chance to lead for a decade’: “5G technology will influence everything we do. Instead of just connecting people to people through their smartphones, 5G connects an unlimited number of things to other things, which can communicate all day, every day. As a result, the value that 5G can create is not constrained by the number of people and the amount of time we have for consuming information. The opportunity for technology to influence productivity and automation could have a seismic impact on our macro economy.”

The proliferation of 5G networks will also have a significant impact on FinTech, itself a great disruptor of the financial services market. The low latency offered by 5G will perhaps be its most attractive feature, at less than one millisecond, down from 50 milliseconds on a 4G device. The stock market will also be revolutionised by this significant reduction.

The banking and financial services industry is changing, and the advent of 5G technology will intensify that process. Though the new technology might not be widely available until around 2025, and may struggle to live up to the hype (at least initially), early adoption of 5G may be one way for FIs and FinTechs to increase their market share, win more customers and drive value creation.

Financial professionals will also benefit, using 5G technology to build more efficient back-end processes. But it will also be exploited by bad actors and hackers for malicious means. IOT devices, for example, offer a huge amount of new entry points into networks, allowing unprecedented access to data and assets. FIs should use the arrival of 5G to develop new features, such as common authentication between different access networks and new security key concepts.

© Financier Worldwide


Richard Summerfield

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