Will 5G open up new possibilities for businesses?

The fifth-generation mobile network, 5G, is the next step in the evolution of telecommunication, replacing the previous versions, 3G and 4G.

The speed and low latency of 5G technology make for extremely quick reaction times, meaning high potential for access to real-time data and transactions.

Dan Bieler, principal analyst at technology research company Forrester, expects 5G technology to facilitate the proliferation of the “virtual bank branch”, which is already under way in parts of Asia, particularly South Korea and China.

“You need to reach your customers while scaling down the branch network,” Bieler says. “5G offers an opportunity to have a high-quality link to your customers.”

“The idea is that you have a one-to-one customised service,” Bieler says.

“You can also think about a scenario whereby someone with a 5G phone uses the 5G capabilities – like the high-definition video capabilities – to identify and authenticate themselves, and then is able to ‘visit’ branches without actually ever visiting the branches in real life.”

May Lam, EY Oceania’s fintech and Asia-Pacific payments leader, says customer expectations are changing. They want not just transactions in real time and just-in-time, but they also want their experience to be “frictionless”, she says.

New world of data

5G technology will also change the way financial products are manufactured and distributed, says Lam.

The vast amount of data that can be collected about an individual via 5G will allow for hyper-personalisation of financial services.

The upshot of all this data collection is that banks won’t always have to distribute products through their traditional channels, such as branches or their own website. Instead, financial products could be offered via adjacent services the consumer is using. For instance, home loan information could be offered by a real estate agent.

The technology may also lead to an erosion of the customer’s relationship with their main financial institution – that is, the bank used for the majority of an individual or a business’s transactions and accounts.

 

"The business model will change to encourage an ecosystem that will have more players come to play, whether they are the new entrants such as the digital disruptors like the fintechs, or the other sectors of retail, utilities, telcos and so on."

 

“Everyone and every business needs financial services, but they don’t necessarily need a financial institution,” says Lam.

“So, the business model will change to encourage an ecosystem that will have more players come to play and more non-traditional financial services come to play, whether they are the new entrants such as the digital disruptors like the fintechs, or the other sectors of retail, utilities, telcos and so on.”

The increasing adoption of 5G comes at the same time as the governments introduce open banking and the consumer data right. This allows consumers to access the data their bank and other businesses collect about them and, if they wish, to supply it to a third party, such as another bank or a fintech, which may in turn offer them a better deal.

Pushing the boundaries

Bieler notes that another feature of 5G is that it can support many more Internet of Things (IoT) sensors in connecting to a network in a given geographic location. A traditional 4G network might be able to handle 50,000 to 100,000 connections in a square kilometre, while 5G can connect up to a million.

“Companies are exploring the use of this IoT feature to think differently about payment streams with 5G,” he says.

For instance, container ports and the items inside them could be connected with IoT sensors, and these items could autonomously signal when the goods have arrived in a port and initiate a financial transaction to pay for the goods.

This could speed up transactions and payments for companies, because they won’t have to wait for human intervention to confirm the goods have arrived and to initiate payment.

These sorts of applications will also become more common in the home, says Bieler. For example, when a coffee machine runs out of beans, it could initiate a purchase transaction to order more.

“I’m sure that we will see these kind of usage scenarios in the future, because it’s so obvious that someone needs to take care of autonomous financial transactions between machines,” Bieler says.