Four Big Ways 5G Technology Will Change Banking

Next-gen mobile communication service will directly benefit financial institutions' ability to improve customer experience and speed the process of digital transformation. With deployment of the technology slowed slightly by the coronavirus, now is the time for banks and credit unions to develop their 5G strategies.

The buzz about the global implementation of 5G has been going on for years now, with very high expectations and even some controversy taking place along the way. But even though full deployment takes time, it is certain that 5G will change many social and business interactions, including banking interactions.

While the COVID-19 crisis has slowed down the deployment of 5G technology in some areas, namely in Europe, the U.S. has experienced less significant delays, The Verge states Nonetheless, the implementation will continue — with 71% of surveyed mobile operators already rolling out 5G networks or planning to do so within a year and a half. And 45% of those operators have assured that commercial deployment is the goal they are motivated to reach quickly, Intelligent CIO reports.

Further, as of May 2020, 42 countries have at least one or more 5G services meeting worldwide industry standards. Moreover, 386 operators already invest in the technology in 125 countries, according to the Global Mobile Suppliers Association.

It is expected that consumers and businesses will generally pick up on 5G mobile technology much faster than they did 4G. Even the coronavirus will not prevent a global 5G subscription number from reaching 2.8 billion in five years, which will be around 30% of all mobile subscriptions at that time. The leaders by number of 5G mobile subscriptions in 2025, according to Ericsson, will be the U.S. (74%), North-East Asia (60%) and Western Europe (55%).

Three Main 5G Attributes

The pandemic created a scenario where people had to use more online services not only for work but other activities like e-commerce, learning, communicating with family and friends, and entertainment. It resulted in more data traffic being generated, which made people crave a better network experience, which 5G can provide.

There are three main benefits of 5G that are usually cited. First of all, is its speed. 5G can transfer data 10 to 20 times faster than 4G. Currently as it rolls out, download speeds vary, but the average download time for 5G equals 1GB per second. That means that a 600 MB video can be downloaded within 30 seconds, compared with more than two minutes on 4G, per Verizon data.

The second advantage is a lower latency. That’s the delay time between a person’s action and the result of the action — for instance, the time between clicking a “play” button and the actual start of the video clip. The delay takes 40 to 50 milliseconds in 4G devices and less than 10 milliseconds in 5G devices, Western Digital notes.

The third advantage is connectivity. 5G opens many new possibilities for the development of the Internet of Things (IoT) in particular, the trend to having cars, home appliances and many other “intelligent” devices connect to the internet. According to Thales Group, 5G will be able to support up to a million devices in a square kilometer (about two fifths of a square mile), meaning more data and more quality services.

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How 5G Will Impact Banks and Credit Unions

Now that the 5G deployment rates, plans, and advantages have been established, let’s look at how the banking industry will change as a result.

1. Overall performance upgrades. The speed increase brought about by 5G networks will be of great service to financial institutions, allowing them to perform more complex processes much faster. If a consumer wants to buy a car or another expensive item, for instance, the application for a credit check and related processes will be much faster and smoother for them. Needless to say, money transfers and investment trading will become a lot speedier, as well.

2. Another push toward digitalization. The coronavirus pandemic has made traditional banks and credit unions realize that going digital is inevitable. 5G technology allows institutions to create more efficient banking apps and websites, where most of the data will be stored in the cloud, enabling a faster and more seamless usage. The spread of IoT will contribute to additional customer interactions, and money operations won’t be slowed down in densely populated areas thanks to the high connectivity.

Financial institutions will be able to become more creative with their mobile apps and websites as they are better able to stream videos in real-time and incorporate augmented reality (AR). The latter could allow the creation digital branches that still incorporate personalized interaction with customers.

Also important: The combination of mobile banking and 5G will reach more customers in rural areas, where there aren’t as many branches.

3. Use of new technologies for better customer service. There will be many ways in which banks and credit unions can improve customer service. From video calls with clients to better understanding their needs with the ability to react in real-time, to providing more mobile apps and website capabilities with augmented and virtual reality (VR) experience.

Machine learning technology will be improved through faster network speed so that financial institutions can collect more information about each consumer and their daily routines to generate a unique customer experience.

Branches will be improved by the deployment of 5G, as even ATMs could be repaired quickly and remotely with the help of AR glasses. Wearing those, an employee will be able to connect with a remote technician, who, through the camera lens, can direct the employee’s actions to repair the machine.

Financial institutions could also incorporate AR and VR technologies on their websites to better communicate features of certain types of products or services such as P2P payments or remote check deposit.

4. Improved security and fraud prevention. With more data coming through during the purchase thanks to faster networks, fraud prevention systems will be able to detect fraudulent transactions more quickly, protecting merchants, financial institutions and consumers from losses. And it surely will accelerate the 3D Secure [3DS2] authentication processes, in which a customer needs to provide biometric data in real-time.

In the near future 5G will enable many possibilities for financial institutions as well as fintechs and third-party providers. Though it is hard to say exactly when these capabilities will be commonplace, the deployment of the 5G mobile network is well under way. Banks and credit unions should not wait to begin looking into and developing strategies for the implementation of 5G technology.

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