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How Will 5G Restructure Finance and FinTech?

2018-12-17 14:19 Monday


Financial institutions are in the midst of becoming more mobile, with many of those legacy operations opting to work more closely with FinTech providers to upgrade services, retain customers and acquire new ones. The debut of 5G promises to add another tool that can aid such efforts and the potential 5G ecosystem for FinTech and mobile banking is gaining clarity.

5G

Banks and credit unions are still wrestling with the best ways to deploy mobile technology, and to do so in ways that balance security, safe authentication and consumer convenience. Machine learning and artificial intelligence are among the emerging technologies capable of boosting banking operations, including customer service and preventing fraud.

5G offers the possibility for new technology. For mobile banking to become ubiquitous, the development of 5G technology is paramount. 5G tech reduces latency and transaction times, which is key to ensuring the network can handle the amount of transactions at scale.

Many familiar banking operations, such as payment services, will attain new forms extending to newer channels, including 5G smartphones, wearables, IoT devices and virtual reality. The increased security and speed made possible by 5G will also revolutionize the capital markets, shortening settlement cycles considerably and removing latencies with real-time mobile trading capabilities.

When it comes to FinTech, perhaps the main appeal of 5G at this point is not speed, but "ultra-low latency". Defined as the time it takes for a device to send a command to a remote server and get a reply, latency looks set to reduce from 50 milliseconds on a 4G phone to under one millisecond in the 5G era. So at the very least, 5G will bring a lightning-fast, real-time user experience to mobile devices, so much so that consumers will experience banking and payment transactions instantly on their devices. 5G will mean zero waiting time. That essentially zero waiting time will also bring other benefits to the world of FinTech.

It seems unlikely at this point that blockchain and cryptocurrency will experience significant benefits from the low latency promised by 5G mobile network technology, according to experts. But latency and other features of 5G do seem set to promote further use in payments, digital banking and financial services via smartphones and other connected devices, including wearables. The looming deployments of 5G come as financial institutions are focusing more on the cloud computing, which also increases what banks and credit unions and FinTech, either on their own or in partnerships - can do with digital technology and product offerings.

Verizon and Samsung plan to launch U.S. 5G phones in the first half of 2019. The move would essentially beat Apple to the market with smartphones featuring 5G technology, because reports say that Apple is going to wait until 2020 to release the first iPhones featuring the tech. But even though Verizon is leading the charge for the new technology, which will greatly increase speeds on mobile networks – up to 50 or 100 times faster than the currently available 4G – some industry watchers say the new tech won't be widely available until about 2025 or so.

Actual 5G deployments may still be in doubt, but it is all but certain that the mobile network technology will offer new ways for financial institutions and FinTech to win more customers and market share.

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