Technology, the thing that now runs the world. It continues to shape various industries, and the financial services sector is perhaps the biggest all-time beneficiary of technological advancement. For those of us old enough to remember those days before we even had flip phones, the change is clear. I remember having to head down to the bank with an electricity bill and my ID to open a bank account then would have to wait for the card to be delivered, for the pin to be delivered separately, and would have to go to an ATM to activate it. Aaah the “good old days”.
But now that we have neobanks popping up all over the place, allowing you to open an account in a few minutes, and do all you need online, without ever having to stand in line, a need has arisen for networking technology to keep up with the times. With all this advancement 3G and 4G just won’t cut it for much longer. So get ready to pick up some 5G stock because it is coming to a city near you. So what might we expect from this new tech and how will it help to shape the financial world?
Connectivity and Speed
There is no doubt in my mind that the near future will be one run on digital currency. Crypto has already proven that digitized money can work and will probably take over the world eventually. Companies like Tencent’s WeChat and Weixin have already shown how easy it can be to incorporate digital payments into people’s everyday lives. But all of this requires fast and stable internet connections.
So, perhaps the most significant impact of 5G on financial services lies in its ability to provide enhanced connectivity and speed. With the previous generations of 3 and 4G things started getting better, but with 5G networks, financial institutions can process transactions, conduct trades, and transfer data faster than ever before. This is a huge step in the right direction. It provides us with as near to real-time data processing as currently possible. The quicker execution times will result in improved customer experiences, increased operational efficiency, and enhanced risk management, to name just a few things.
But all that is just on the payment side of things. I am a long-time trader, so to me, the impact that this will have on trading is something to be noted. While there is no doubt that a fiber optic line will still trump 5G when it comes to things like high-frequency trading, for those retail investors who just want to make sure they avoid any slippage due to latency, 5G should be perfect. And all this can take pace on the go while not having access to your home or office fiber connection anyways.
Internet of Things (IoT)
Love it or hate it, more things are being connected to the internet each and every day. Smart homes are becoming a common sight and 5G’s high bandwidth and low latency capabilities pave the way for expanded integration of these things. IoT devices, such as smart sensors, wearables, and connected vehicles, are all now on the net and continually communicating with the online world. Well, how does that benefit the financial services sector? Data. These devices all generate vast amounts of data. Financial institutions love data, as they can leverage it in ways to gain valuable insights into human behavior and ultimately offer personalized financial services that are tailored to the individual.
Take for example insurance companies, they need as much info about a potential client as possible to make sure that they won’t end up losing money. Sure, they are there in case of emergencies, but let’s not bullshit each other, they are out to make money. These companies can utilize these IoT devices to monitor policyholders’ behavior in real-time, enabling them to assess risks accurately and customize insurance plans accordingly. Connected cars equipped with 5G connectivity can transmit data on driving patterns and vehicle diagnostics, allowing insurers to tailor premiums based on individual driving behavior. While this might seem intrusive, it could also play in the favor of the client. Let’s say that you get into a car accident and info is needed about the exact time and location; no need to try and comb through that chaotic brain box in your head, just check the data that was uploaded by your phone, car, and smartwatch. All of this data, with the compliments of 5G technology.
Security and Fraud Detection
Better security is always better, especially when dealing with anything online. The implementation of 5G brings with it some enhanced security features that have been put together by several big organizations, including the 3rd Generation Partnership Project (3GPP), European Telecommunications Standards Institute (ETSI), and Internet Engineering Task Force (IETF). If you don’t know who these people are, go Google them; but all you need to know is that they take securing data very seriously.
What the new standards that are being implemented in 5G will allow us to do is to bolster fraud detection and prevention measures within the financial services industry. The ability to transmit data more securely and at faster speeds means that it allows for real-time analysis of transactions, enabling quicker identification of suspicious activities, and thus cutting out any sneaky buggers trying to get in the middle of a transaction.
We keep seeing advancements in AI cybersecurity, and 5G’s capabilities can allow financial institutions to deploy this kind of advanced technology to detect fraudulent patterns and anomalies in real-time. This proactive approach to fraud detection can play a big part in helping financial institutions mitigate risks and minimize financial losses for both the institutions and their customers.
Final Thoughts
As we speed our way into an ever-digitized future, 5G technology will play an increasingly important role in many aspects of it. As the old saying goes, if you can’t beat them, join them.
But, when it comes to 5G the financial services industry only stands to benefit from its transformative potential. As I have mentioned, enhanced connectivity, fast speeds, low latency, and improved security are all parts of this innovative tech that will drive improvements in operational efficiency, customer experiences, and risk management. Even the integration of IoT devices could have an interesting and potentially positive effect on this industry as it allows for a more personalized financial services experience. Exactly what to expect from 5G is not entirely clear as it is rolled out worldwide, but by harnessing the power of 5G, the financial services industry can usher in a new era of innovation, efficiency, and customer-centricity.