By Dima Kats, CEO, and founder of Clear Junction
The 5G rollout is accelerating as mobile telcos build out their networks, resulting in most of the UK now expected to have access to 5G network by 2022. While the headlines are mainly about faster mobile internet connections, we are rapidly moving into the next phase, where multiple new use cases are being developed as businesses further understand the implications of ubiquitous low-latency, high-speed connectivity.
5G will change the world, and the fintech industry is no exception. Routine tasks, such as acquiring credit information, will move to 5G-enabled edge- and cloud-computing operations and the move towards mobile payments will accelerate. The result is that financial institutions should start preparing for the onset of 5G now as the window of opportunity to capture a competitive edge will be a short one.
Accelerating mobile banking
One of the prime areas that will be disrupted by 5G is that of mobile payments. Instant one-to-one payments of small amounts of money will accelerate the demise of cash as the primary payment method. Already, nearly 20% of millennials in FIS’s 2019 Performance Against Customer Expectations (PACE) survey said they’ve stopped using cash entirely, and such attitudes have only been boosted by the pandemic and the growing realisation of safety aspects of contactless payments.
It is currently predicted that 72% of UK adults will use mobile apps for payments and transactions by 2023, and there is momentum behind this that reaches across demographics. While usage declines with age, an impressive 61% of over-65s still say they carried out a contactless payment last year.
5G will make the mobile payment experience even more seamless than it currently is, further fuelling the uptake of contactless payment methods and ensuring more transactions will be processed via an increasing number of smartphones, smartwatches, other wearables, and an increasingly large number of internet-of-things (IoT) channels.
This will help drive the uptake of mobile banking, making it the primary means by which customers will interact with their bank accounts. Accommodating their demands for minimal friction ways to make deposits and account transfers, as well as monitoring spending and earnings, is likely to be a key differentiator for banking services soon.
Enhanced customer experience
The always-on nature of 5G connections will remove any existing bottlenecks for a wide range of financial services, all of which can help drive an enhanced customer experience for payments and contribute to a more mobile-centric and human-centric business model. It holds the promise of being able to improve back-end internal operations, front-end client interfaces, and middle-office partner collaboration, raising the bar regarding not only what is possible but what is expected before, during, and after the transaction.
As an example, customers will expect loan applications and credit checks to be both available on mobile and to be swift. The speed of the network will mean that customer data and AI (artificial intelligence) powered compliance checks can be matched almost instantaneously. As a direct consequence, customers will become used to instant authorisations and more, and will have an expectation that payments will be close to immediate. Lower latency across networks means that cross-border payments will also benefit from increased clearance and transfer times.
As transactions move to an increasingly automated experience, the ability to maintain trust, security and compliance will become increasingly important. Happily, another benefit of 5G will be the ability for banks to improve proactive fraud prevention, as many of the processes involved in transactions — from confirming funds to customer geolocation and merchant ID — are all areas that can be accelerated to near real time by 5G. An increase in capability in this field will work to minimise errors, leading to increased confidence in the system as it scales.
Window of opportunity
It is important for financial institutions to be aware of the speed of change within both 5G technologies and the business models they enable. The key to success will be to ensure they have a secure digital foundation that they can use as a platform to launch new services and capabilities as opportunities arise.
Guidance from a partner can help. At Clear Junction, we empower businesses to capture and connect to new opportunities by accessing the tools, networks, and knowledge they need, 5G or otherwise. As a global payments solutions provider, we can provide exactly the level of support that businesses require; a secure, regulated and optimised payment infrastructure that is capable of scaling and evolving to meet the new challenges ahead.
Digital transformation already involves surmounting many challenges, but the impact of 5G will intensify these as it introduces increasing velocity to both change and opportunity. Working with an expert partner in the payments space is an important strategic decision in being able to navigate the shifting currents of future business; ensuring companies retain a competitive advantage over their rivals, provide a seamless customer experience, and remain at the forefront of the services that will emerge.