How 5G Will Reshape the Future of Digital Banking & Payments

With coverage near 80%, the hype is turning into reality. The new partnership between Mastercard and Verizon Business to apply 5G to payments portends practical applications of this technology that could potentially transform banking, from data analytics to in-branch service.

The much anticipated application of 5G technology in financial services took a major step forward when Verizon Business and Mastercard announced a strategic partnership that the companies believe will fundamentally change global payments and commerce.

Just two years after Verizon launched 5G service in two Midwest cities, the high-speed technology is already predicted to be far more than an incremental change.

“The 5G era is here, introducing the next generation of smart business applications just as organizations plan how to emerge stronger in the post-pandemic world,” declares a PwC analysis. “The potential for impact across industries is enormous, but to realize these gains companies will need a strategic approach — one underpinned by a clear view of the use cases that will deliver the greatest value over time.”

Telling Statistic:

PwC anticipates approximately $43 billion in productivity gains for financial services in the U.S. by 2030 from 5G, primarily through improved customer experience and reduced losses from fraud.

By now anyone with a new mobile phone has seen a little “5G” indicator show up on their screens from time to time. Although far from universal so far, PwC predicts 80% of the U.S. population will have 5G coverage — either at home or at work — by midsummer 2021. There are different levels of 5G service, but all of them are faster than the predecessor 4G network technology. In term of mobile devices capable of tapping that speed, the consulting firm pegs that at just 12% so far, therefore usage of the technology won’t reach scale for some years.

“5G” stands for the fifth generation of mobile communication. Beginning in 1980 with the advent of analog voice, every decade since has seen a subsequent generation with advancements. 4G, for example, came in the 2010s enabling broadband data and video. 5G, however, delivers speed 10 to 100 times faster than 4G. It brings down latency (i.e. the time between touching a button to getting the desired response) to less than 1 millisecond. It enhances connectivity, particularly with the internet of things.

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Payments Partnership Builds on 5G

The Mastercard/Verizon Business partnership will establish a tech hub in New York City where they will test and embed 5G in various payments-related applications. Here are some of them, as cited by the two tech companies:

  • Enable smartphones or connected devices to seamlessly accept payments. (meaning every phone becomes a POS terminal).
  • Unlock touchless retail shopping experiences.
  • Empower small business digital readiness.
  • Enhance the bill-pay experience.

Contemplated applications for 5G go far beyond payments, however. Banks and credit unions have been hearing about the importance of targeting consumers with “hyper-contextualized” advice and better product and loan recommendations. 5G network speed is the backbone over which that capability becomes a reality.

As described in a blog from network integrator STL, high-resolution streaming that enables video consultations between financial representatives and customers will become the norm, building off greater consumer interest in video communications. Pop-up mobile branches enabled by 5G connectivity will further reduce the need for brick-and-mortar branches.

In addition, processing of big-ticket transactions, such as car loans and mortgages, could be dramatically speeded up. Fraud prevention will take several steps forward in effectiveness with 5G, as well.

Read More: Frustrated Banks & Credit Unions Seek Better Tech to Stay Competitive

Three 5G-Related Technologies to Be Aware Of

Accomplishing all this may be a challenge as it entails not only 5G, but a host of other emerging technologies that just now are entering the “technosphere.” These are even newer than such by-now mainstream technologies as artificial intelligence, internet-of-things, and wearable devices — although all of those figure prominently as 5G becomes ubiquitous.

Here’s a quick primer on three 5G-related technologies that may be common knowledge in a few years:

Edge Computing. IBM defines this as a distributed computing framework that brings enterprise applications closer to data sources. The tech company further explains it this way:

“In the past, the promise of cloud and AI was to automate and speed innovation by deriving actionable insight from data. But the unprecedented scale and complexity of data that’s created by connected devices has outpaced network and infrastructure capabilities. [With edge computing] data is processed and analyzed closer to the point where it’s created.” Edge computing is a big reason why 5G is so much faster than 4G.

XR. This stands for “extended reality” and refers to the use of immersive technologies that merge the physical and virtual worlds. It includes virtual reality, which produces an artificial three-dimensional environment; augmented reality, which interacts between a virtual experience and the real world; and mixed reality, which combines both the digital and real world into one environment so they coincide and interact with each other in real time.

The 5G realm, due to speed and short latency, makes such applications practical. For financial services, one or more of such applications could enhance digital customer interactions, including in-branch.

Gait analysis. As one more arrow in the quiver of online authentication, identification, and fraud detection, gait analysis purports to be able to detect an individual’s unique walking style and add it to other biometric processes. 5G makes this practicable.

The American National Standards Institute says gait technology has two advantages over fingerprints and iris recognition: It can be done at a distance and it doesn’t require the user’s recognition.

Increased 5G Use Will Raise Consumer Expectations

It’s the convergence of these technologies with all the others already in the mix that promise to alter virtually everything related to financial services. The Mastercard/Verizon collaboration illustrates the beginning of such a transformative process.

Keep in Mind:

Before you relegate 5G to the back burner because it’s still developing, consider that fintechs and big techs will take full advantage of it asap.

“Emerging technology such as 5G and mobile edge computing will undoubtedly reshape how we interact with each other, making it all the more critical for these exchanges — particularly payments — to be trusted and [to] anticipate further changes,” says Linda Kirkpatrick, President, North America, at Mastercard.

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

“By 2025 there will be over 2.8 billion 5G subscriptions in the world,” says Shweta Mali, writing in the STL Blog. “With superfast digital connectivity a new normal, consumers will begin to demand the same from their banking experience. This is where banks will also hop on the 5G bandwagon to improve the speed of digital transformation, enhance the customer experience, explore new revenue streams, and achieve greater cost efficiency.”

It’s a hop they must take because fintech and big tech competitors will be all over 5G capability.

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