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How 5G is transforming the digital banking landscape

By Gaia Lamperti

August 17, 2021

  • 5G
  • Analytics
  • Big Data
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5G

The rollout of 5G has brought remarkable transformation for financial services along with more growth opportunities for digital banks. Being digital banking inextricably linked to broadband networks, innovation in mobile communication has significantly impacted the service offerings.

5G stands for “fifth generation” mobile communication, an advancement from the previous 4G in terms of speed and connectivity. The use of 5G technology has enabled easier access to cloud technology, the processing of high volumes of data with minimal delay, and new products for customers.

Some have even gone so far as to argue that 5G opens the door to FinTech 2.0 thanks to its applications in emerging spheres like machine-to-machine (M2M) communication, virtual reality (VR) and the internet of things (IoT).

According to recent research by PwC, approximately $43 billion in productivity gains are anticipated for financial services in the US by 2030 thanks to the 5G. Against the backdrop of the Covid-19 outbreak and the ongoing growth in mobile phone penetration, 5G found particular applications in digital payments consequentially contributing to e-commerce expansion.

The announcement of a strategic partnership between Verizon Business and Mastercard earlier this year has been decisive to bring 5G into the global payment industry. Its application is becoming key in unlocking the IoT potential for FinTechs and the banking industry, with benefits including:

• Enabling smartphones or connected devices to seamlessly accept payment,
• Unlocking touchless retail shopping experiences,
• Creating new ways to consume physical and digital goods,
• Creating new ways to consume physical and digital goods, and
• Enhancing the bill pay experience for Verizon customers

However, 5G’s advancements go well beyond payments. It is enabling financial institutions to perform more complex processes, such as ID verification, new customers onboarding, and loan tracking, minimising times and reducing fraud detection errors. In fact, the technology brought down latency (the time it takes for an input to a remote server to get a response) to less than 1 millisecond, compared to the 4G’s 50 milliseconds.

In addition, 5G provided a more seamless customer experience by ensuring better performances of existing apps and websites. Many mobile banking apps’ functionalities benefitted from the technology to perform faster and more accurately. It also upgraded ATMs and kiosks to deliver faster services as well as giving life to 5G-enabled pop-up mobile branches to reduce brick-and-mortar branches.

Banks and credit unions have now realised the immense capability of mobile communication to offer “hyper-contextualized” advice and better product and loan recommendations to target the right customers. 5G allows personalized user experiences facilitated by real-time data analysis and hyper-connectivity through APIs to various databases.

As of November last year, according to GSA’s 5G Market Snapshot 122 commercial 5G networks have been launched around the world, with over 400 operators are investing in planning or implementation of 5G in 129 countries and territories.

While the technology continues to favour several industries, FinTech is definitely among the most vigilant about tracking the progress of 5G. Its low latency, opportunity to leverage IoT and faster banking services are paving the way for better customer experiences and a shift in demand across the entire sector.

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