How the upcoming 5G wave will change financial services

There’s a sense out there in the marketplace that 5G is simply a faster version of 4G. But as Oracle’s Travis Russel explained during a Competitive Carriers Association webinar, that’s not actually the case. The cloud and telecoms giant said that 5G is inherent to distributive computing and not as intimately related to legacy telecoms tech as people imagine. The core of the technology is in the cloud. 

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Organizations – both inside the financial sector and out – need to pay close attention to what’s coming down the pike. 5G represents both a qualitative and quantitative transformation in information processing, meaning that financial institutions and enterprises that depend on them will need to adapt. 

Performance improvements

5G offers several attributes that represent dramatic improvements over existing mobile data networks. The first is speed. 5G will, according to experts, allow users to transfer data between 10 and 20 times faster than they can on current 4G networks. 5G will offer connections of up to 1GB per second, which is on a par with the rate at which modern hard drives can communicate with processors inside devices themselves. 

5G will also provide lower latency, meaning that the time a person has to wait between sending an instruction and receiving it is much lower. Estimates suggest that the delay between clicking a video clip and its starting 4G is around 40 to 50 milliseconds. On 5G, that drops to just ten milliseconds – a wild improvement. 

The third and final advantage of 5G is the fact that it provides better connectivity. You could potentially have thousands of objects communicating with the internet via a single dish. 

These performance improvements matter for enterprises. For financial institutions, it means that they can offer better real-time services to their clients. 

For instance, you can imagine a situation where somebody is traveling down the highway and wants to get somewhere fast. At present, there’s nothing that they can do to incentivize the traffic in front of them to move out of the way and let them pass. But with 5G’s low latencies, it will soon become possible to transfer a small payment to the vehicle in front in real-time as a thank you for pulling over to let you through. 

This example, of course, is just one among many. Banks may find themselves fulfilling crypto transactions for people giving to people begging in the street via smartphone apps or faster service payments in the checkout queue. It’s all possible. 

Thus, the nature of the experience of banking is going to change. And we are going to see entire enterprises build themselves from the core technology upwards. Expect the emergence of queuing apps that allow users to skip the person in front of them by sending them a small encrypted payment. Developers will need to build the app ecosystem to go with these ideas, highlighting the importance of this technology for large companies. 

Digitization

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Here’s another way that 5G will change the way enterprises bank and how the financial institutions themselves operate: digitization. 

Even before the present pandemic, digitization was becoming increasingly crucial to banking. Enterprises wanted instant, low-cost banking solutions that didn’t rely on lengthy consultations or folder after folder, stuffed with papers. They wanted a solution that allowed them to get on with the task at hand with low overhead. 

The development of Oracle 5G SCP is going to bring this idea closer to reality. The backbone is now in place at the enterprise level for financial institutions to build systems that enable faster and more seamless usage. 

The first thing we will see is more efficient and faster-loading banking apps. But that’s not the source of the real excitement here. Visionaries see a different kind of future being made possible through 5G. Because of the IoT’s role, we could see radically new ways that people pay for things. There could come a time in the near future where enterprises can just use their company devices passively to pay for things. Or, even more weirdly, hook their own bodies up to the IoT through non-invasive methods, such as image recognition. 

Digitization is becoming increasingly necessary for all firms in the context of the coronavirus. Mitigating enterprise-level risks means keeping employees as far away from each other as possible, without damaging output. 

Whether firms will be able to achieve that level of reliance on computer systems remains to be seen. But 5G is undoubtedly going to help push things in that direction. 

Better customer service options

Imagine if your enterprise could somehow provide customers with real-time demonstrations of a product or concept, no matter where they happened to be. Well, it turns out that 5G technology is pushing firms in that direction. 

Because of the speed and bandwidth that it offers, 5G will allow enterprises to connect to VR headsets in other organizations, showing their clients precisely what they are doing or how to proceed. The actual real-time implications of the technology will come to fruition when entrepreneurs get their hands on the idea, but you can imagine several standard scenarios. 

For instance, branches that use 5G may be able to repair ATMs faster with the use of AR glasses. Employees in the field could link with experienced professionals back at the head office, allowing them to see what they see, making the task a collaborative effort if they get stuck. You can imagine a situation where you have a supervisor watching his staff’s operations through a multi-monitor setup. 

Better fraud prevention

Fraud prevention is a massive issue for enterprises that currently rely on 4G networks. Large corporations are losing billions of dollars per year to individuals who know precisely how to game the system. 

However, the hope is that with 5G, this sort of thing will come to an end. The idea is that faster networks will be able to identify fraudulent transactions more quickly, protecting both financial institutions and the merchants who depend on them. For instance, if the hardware supporting the network is faster, it will accelerate 3D Secure authentication processes. And that will provide clients with a greater level of confidence in the system. 

Unfortunately, it is not clear exactly how the technology will develop in this regard. Most banks and financial institutions believe it will assist them greatly, but how exactly remains a matter of discovery.

Privacy concerns

While the development of 5G is undoubtedly an exciting prospect, there are various concerns for banks and other major institutions. 

One issue relates to the risk of personal privacy breaches – something that is overwhelmingly important for the sector. 

5G will allow the networking of millions of sensors and cameras, all working in tandem. Thus, it will involve a massive customer data collection network, allowing financial institutions to find out pretty much whatever they like about their clients. 

In the context of data protection legislation, this is an issue. Plus, customers themselves might not want banks to track their every move or monitor their every conversation. That’s not a world in which anyone wants to reside. 

5G, therefore, will bring the issue of privacy to the fore. Financial institutions will need to show that they have a plan in place to prevent the abuse of the technology. 

One defense will probably be the fact most banks have limited in-house capabilities anyway. They are legacy firms, not tech startups, so they aren’t in the business of collecting as much data as possible for their advertising efforts. Instead, for them, it is all about offering superior customer service. 

However, that assertion might also work against them if people believe that they are incompetent somehow. 

Health concerns

Financial institutions will also have to manage the growing calls to shut down the 5G project because of health concerns. Medical officials are adamant that the technology won’t damage health because it uses non-ionizing radiation that doesn’t damage DNA. But whether it causes no damage whatsoever remains a matter of public concern. 

Therefore, banks and other large enterprises are going to have to engage in some positive PR efforts to showcase 5G in the best light possible. Not everyone will be keen to adopt the technology immediately. 

Micropayments

Finally, 5G is likely to result in more micropayments, partly due to the installation of more sensors, and partly the improvements in bandwidth and latency. 

We already touched on this idea in the discussion above, but it is well worth reiterating here. Small payments could change the nature of the economy and help to correct markets. 

Imagine, for instance, if it became easy for people to transact instantly with each other for whatever purposes they wanted. Customers might decide to transact with each other in fractions of a penny. Or one person might pay another to keep the noise down at night, incentivizing better behavior. 

It’s a strange kind of banking that bypasses the old merchant POS system. But it could become a reality. In fact, it’s just a question of putting the technological infrastructure in place. It makes sense in a peer-to-peer, distributed world. 

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