It’s no secret that financial technology (fintech) is changing the banking industry in a big way. This new technology has been easily accepted by a generation accustomed to taking care of everything from financial transactions to healthcare monitoring on their phones and other devices.
Fintech startups are capable of more flexibility than big banks, and as a result, these large institutions are trying to become more flexible to keep from falling out of favor.
Banks have been on the cusp of new technology in the past, such as ATM machines and online banking, for example, but now they need to stretch themselves even more to stay relevant. With 5G technology on the horizon, here are some things you need to know about its effect on banking and fintech.
5G: What Is It and What Does It Mean?
Most people hear about 5G and think about faster Internet speeds, but that’s not the main way it will impact banking and fintech. Once 5G technology goes online (probably in early 2020), smartphones will see exponential increases in download and upload speeds—as high as 20gbps for downloads and 10gbps for uploads.
The most important change for banking and fintech would likely be in ultra-low latency. Latency is defined as the time a device takes to send a command and get a reply from a remote server. With 5G technology, latency will likely be reduced from 50 milliseconds to less than 1 millisecond, which will translate to basically zero wait time for mobile users.
This improvement in latency means banking institutions will increasingly use new applications and application programming interfaces (APIs). Accessing bank databases to complete transactions will be almost instantaneous.
The Internet of Things
5G technology is also capable of connecting more devices at a lower power, with a lower cost, and with better reliability. This is likely to supercharge the advent of more Internet of Things (IoT) devices.
The IoT is a huge network of connected devices, including everything from fitness wearables to home appliances to public infrastructure. The use of 5G technology will allow all these different devices to easily communicate with each other, making payments from any type of wearable quick and easy. It might even eliminate the need for wallets altogether someday!
Additionally, since most wearable devices already collect some form of biometric data, they will automatically create an extra layer of security to help definitively identify each user. Information as subtle as the position in which you hold your phone or your natural gait can help identify you.
In addition to the extra security that comes from biometric data, 5G offers another way to improve overall security. Any data issues or vulnerabilities in security that are detected within an app now require an update to correct. Further, the user must manually intervene for the update to perform.
With 5G technology, a bank can make changes and improvements in real time, without ever needing to bother the customer. This makes it easier to ensure all security vulnerabilities are taken care of in a timely manner. Because of 5G speeds, more data can travel quickly in real time, which allows for better and more accurate fraud prevention. This will help keep legitimate mobile wallet purchases from being rejected due to incorrectly suspected fraud, and it will keep customers happier and less frustrated.
Speeding up Big Purchases
5G also shows potential to help speed up the process involved in making very large purchases, like a car or home, by streamlining the applications, credit checks, financing, and availability of funds in one quick process. Banks will be able to use 5G technology alongside artificial intelligence tools to help run different processes side by side in real time. The end result is likely to be better accuracy in lending decisions as well as lending rates that are better matched to each applicant’s individual circumstances.
Mobile or Pop-up Branches
This technology will also likely help banks deal with bringing the branch services to the customer. There is still some debate over whether brick-and-mortar bank locations are becoming obsolete, but with the help of 5G, banks might be able to change that.
For instance, what if banks could literally bring a branch to the customer, wherever needed? Without the need for a literal building, there could be mobile and pop-up services that give customers everything they need in a bank branch right where they are. They would also give these financial institutions some much-needed flexibility, not to mention the ability to assist their customers on demand. This would help with improving access to banking services in underserved areas as well.