The buzz around the deployment of 5G connectivity is still growing with expectations around how it will accelerate the use of modern technology.

While it will still take time for it to have an impact, 5G is likely to change the way that customers interact with financial services institutions. According to reports, 45% of survey respondents say their company is racing towards 5G commercial deployment, with 71% of service providers claiming to have begun rollouts starting within the next 18 months. 

5G – A Brief Overview

In the next 3 to 5 years, 5G will become the standard for mobile content delivery. Statista report that over 70% of mobile connections in 2019 are 4G, with those who use it accessing the internet faster via smartphones, tablets, and other IoT devices. However, despite the advancement of 4G over 3G, it can still be glitchy with saturated networks in densely populated areas.

Truth is, 5G goes to an entirely new level from 4G. The connectivity is significantly faster, stable, and always available. Trials in London found that 5G is up to 100 times faster than 4G. The table below shows the attributes of each level of connectivity.

The reason 5G is so much faster is due to using the millimeter wave spectrum. In short, this allows more devices to be active in the same population space. To put that into context, as many as one million devices can be used simultaneously, against 4,000 with 4G. Coverage, speed, and capacity improve through a digital technology called Massive MIMO (multiple input, multiple output).

It is thought that even the coronavirus pandemic won’t stop businesses picking up on 5G technology, with many seeing it as necessary to facilitate remote working better. People are now generating more data traffic and desire a better network experience, which 5G can provide.

In financial services, there are several ways that 5G could transform the industry.

Mobile Trading

5G has the potential to create a new era for high-frequency mobile trading, where seconds can make a massive difference. The reduction in latency between 4G and 5G will be of enormous benefit to brokerage firms looking to drive efficient stock market transactions.

Investors can increase the volume of orders that they execute in a short space of time, something that is imperative for day traders who rely on high-frequency algorithms. As 5G also delivers far higher frequencies than 4G connections, the number of glitches in the system will quickly decline, adding reliability to trading networks.

Customer Service

The additional speed and lower latency of 5G will improve the application of artificial intelligence (AI) and machine learning in financial firms. The last decade has seen a spike in the use of AI as a way of better understanding the customer and analyzing their transactions. Banks are also looking towards new technologies like augmented reality (AR) and virtual reality (VR)  that rely on fast connections to be efficient.

Using 5G, AR deployments could lead to ATM repairs remotely as employees connect with remote technicians to direct their actions. VR can also help to communicate features of a product more effectively, like depositing a cheque remotely or carrying out P2P payments.

Wearables

Wearable devices have already become an important way for customers to make mobile payments, and there is no sign of this slowing down in the future. Banks use biometric checks like fingerprints to validate customer identities. As of now, these work well with 4G, but biometric checks are becoming more sophisticated, moving from fingers to faces, voices, and behaviours.

5G connectivity ensures that image and audio data are reliable with lower latency than ever before. The service can check patterns in real-time, enhance security, improve customer experience, and allow banks to rely on more than one form of biometric information. The multi-layered approach for biometric authentication with 5G will offer extra account protection, and substantial reduction in risk of false negatives.

Fraud and Security

5G will help to detect fraudulent transactions more quickly, protecting consumers from losses on a proactive basis. The speed and latency of 5G accelerate the 3D Secure (3DS2) authentication process, where a customer needs to provide real-time biometric data.

Fraud technology in banks relies on analysing patterns in data through machine learning that can often be slow, especially when they now need to understand voice and image information. 5G connections make the process one hundred times faster than the current 4G network capability.

Performance Upgrades

As a whole, financial operations will become far smoother and more efficient. Banking requires several complex processes like Know Your Customer (KYC) and credit checks that involve waiting times before a customer is authorized to complete a transaction. For example, if a consumer wants to loan, a full credit check is necessary to understand their affordability. Through 5G, the procedure can be virtually instant, without human intervention, and revolutionize how people deal with financial firms.

The Risks of 5G

As with any new technology, 5G comes with incumbent risks to financial firms. For the industry, the increase in bandwidth will see an enormous flow of customer data between sensors and cameras flowing through the network. The responsibility of the bank to protect customer data will increase beyond ticking the boxes of GDPR or CCPA policies.

Realistically, with the volume of data collected from 5G applications, financial firms will need a full review of their existing data procedures.

To make the most of the 5G opportunity, firms will need to make sure they have an IT infrastructure to cope with it. A central data center may quickly become overrun by data if new services like cloud and edge computing are not put in place. Banks that do not have modern infrastructure offerings could soon be disappointed by 5G until they catch up internally.

While it becomes easier to improve security through 5G, it also allows cybercriminals to find new ways to attack financial enterprises. The amount of data traveling via financial networks could make it a hotbed for those with malicious intent.

Summary

5G will act as an enabler for financial institutions to modernize how they operate. Although we cannot tell when this will become commonplace, the deployment of 5G is well underway in Europe and the US. Banks and other financial services should focus on investing in the right infrastructure to be 5G ready and develop and strategy for how 5G will change their way of working.

Disclaimer:  The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech and entertainment.  Mr. Chalopin is Chairman of Deltec International Group, deltecbankstag.wpengine.com.

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business.  Mr. Trehan is a Senior VP at Deltec International Group, deltecbankstag.wpengine.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees.