Banking in 5G: Why Financial Marketers Should Care (Now)

With nearly every new technology, banks and credit unions like to take a wait-and-see position. But many experts warn that such thinking is risky when it comes to 5G. Several point to the seismic shift in digital banking capabilities that the new wireless technology will enable, and the danger of not being prepared for the change.

There are only so many “transformational” technology shifts an average person can handle at once. So it’s not surprising that in the run-up to the launch of 5G communications technology, there’s some reluctance among business leaders to go all in.

An Accenture survey reveals a great deal of confusion and ambivalence about the new technology among business executives. While the leaders acknowledge its potential competitive implications, they don’t grasp how significant it will be, even though 5G — the fifth generation wireless technology — has already been launched on a limited basis in dozens of U.S. cities and elsewhere around the world.

The ongoing marketing war among the major carriers — accusations of dubious claims continually fly back and forth — hasn’t helped. Amid the rhetoric, a growing number of respected voices warn financial institutions about the danger of ignoring this major technology shift.

FIS Chief Data Officer Bob Legters states that 5G will be a key factor in enhancing consumers’ banking experience.

Dan Latimore, Chief Research Officer at Celent, goes so far as to say in a blog that he has completely switched his view on the subject. He has moved from thinking that retail banking could “wait and see” with regard to 5G to believing that the implications of the technology on the industry “will be profound” as it is rolls out over the next three to five years.

Many banks and credit unions continue to wrestle with how to become more mobile and technology savvy. Things won’t grow any easier, according to Financier Worldwide, which states that “the introduction of 5G will … change the paradigm for many institutions.”

“If incumbent businesses don’t pick up the pace in preparing for 5G, the resulting gaps will inevitably attract new entrants, unleashing sudden disruptions.” Omar Abbosh and Larry Downes, Accenture

Omar Abbosh and Larry Downes, co-authors of Pivot to the Future: Discovering Value and Creating Growth in a Disrupted World, state that “5G, when fully implemented, is poised to be … a far bigger transformation in mobile technology than any previous generational shift.” Writing in the Harvard Business Review they note that most senior executives are looking at this technology through the lens of incremental improvements, rather than imagining how it could be used to reshape industries. The two experts warn that “if incumbent businesses don’t pick up the pace in preparing for 5G, the resulting gaps will inevitably attract new entrants, unleashing the kind of sudden disruptions that have unsettled mature industries.”

The Potential for 5G in Financial Services

It’s been widely covered how 5G, which uses a different technology than 3G and 4G, will increase communication speeds by 10 to 100 times over 4G, depending on the source. Translation: Bandwidth will not be a limiting factor in digital communications for the foreseeable future. The 5G networks will actually compete head-on with wired broadband systems, including those using the fastest fiber-optics, according to Abbosh and Downes.

That means that delays in downloading, streaming or connecting will be virtually eliminated. No one will have to watch the progress bar creep across a mobile screen anymore. 5G also means no degradation of speed or capacity even when large numbers of people are all using their mobile devices at once, such as at an event or during a natural disaster.

Here are a few of the many specific banking possibilities cited by many sources:

  • Reduced video lag. 5G makes real-time video chat and consultations between bankers and consumers much more feasible and satisfactory, whether on a mobile device, in a branch, or at an ATM.
  • ATM placement will be much more flexible using 5G network connections.
  • Full-power mobile pop-up branches. These in-the-moment units will be able to handle everything a regular branch can handle.
  • Increased banking capability for wearable devices, including payments. “As 5G marches toward ubiquity,” says Bob Legters of FIS, “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.”
  • Greatly enhanced personalization. The combination of 5G, artificial intelligence and big data will enable real-time information gathering, paving the way for AI-based personalized banking services.
  • Shift to the cloud for mobile banking. 5G networks will allow much more processing to be done in the cloud rather than on a mobile phone. That may even eliminate the need for mobile banking apps, at some point.
  • Supercharged IoT. 5G network capability will give a huge boost to the emerging Internet of Things — billions of connected devices.
  • More accurate fraud detection. The much greater speed of 5G will allow geolocation, transaction and other data to be analyzed instantly, resulting in fewer false positives.

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5G Is Right Around the Corner

There have already been protests by groups of people claiming that 5G technology could be harmful to humans, animals, even plant life, so the road to full rollout is likely to have some bumps.

But 5G is live in numerous cities already including Chicago, Minneapolis and New York, and the major carriers are all racing forward. AT&T has already installed 5G in about 20 cities, according to one source. Verizon says it will have 5G in 30 cities by the end of 2019. Verizon also has pilots underway for 5G home service, but its priority is mobile. Internet of Things applications will likely follow later. Motorola and Samsung already have 5G-ready phones available and many others have been announced.

Overall, the consensus is that full 5G deployment is likely by 2025, depending on how regulators and local governments respond to various issues. Until then, coverage likely will be spotty. One reason is because 5G technology doesn’t travel as far as 4G did, nor does it go through walls as well, so it requires many more transmission nodes to be set up.

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What Financial Institutions Must Do ASAP

The main lesson offered by the experts: Banks and credit unions should not treat the arrival of 5G as modest tech upgrade. It’s the equivalent of the oversize impact the introduction of the iPhone had on the cellphone market, not to mention on how consumers manage their lives, and their banking.

In addition, 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 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 huge 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.”

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