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How 5G is going to transform digital banking in 2021
Covid-19 has accelerated digital banking this year and 5G promises to have an even bigger impact next year
Covid-19 sparked a digital banking boom, caused by social distancing measures and lockdown restrictions. It led to more people opening savings accounts with their mobile devices and existing customers putting extra money aside for an uncertain future.
Next year will bring even more growth opportunities for digital banks and a remarkable transformation for financial services. But this time around, the catalyst for growth will not be the pandemic, but the launch of 5G.
Digital banking is inextricably linked to mobile phones – and when it comes to mobile money and wallets, the biggest shift in service offerings will come from the next generation of mobile communication.
5G makes it easier for businesses to access cloud technology, and to enable faster development of business and consumer services. The network allows higher density of mobile broadband and lower battery consumption and can process high volumes of data with minimal delay. With more data, innovation can accelerate and speed the process of digital transformation, leading to more products for customers.
As the mobile sector rolls out 5G in 2021, banks and credit unions have to prepare by developing their 5G strategies to compete with their fintech rivals. Otherwise they risk falling behind in the digital economy.
The roll-out of 5G will transform digital banking in the following ways.
First, the speed increase brought about by 5G networks will enable financial institutions to perform more complex processes much more quickly, minimising waiting times for things such as ID verification for new customer onboarding and loan tracking.
Second, there will be better performance of existing apps and websites. Despite the renewed push for digital because of the Covid-19 pandemic, many mobile banking apps still lag behind when it comes to functionality. Frequent complaints include the slow speed of mobile apps, the frequency of crashing or timing out and the inconsistent performance of face ID recognition.
5G will enable banks to clean up these inconveniences and help them provide a more seamless customer experience.
Third, upgrading ATMs and kiosks to 5G will deliver faster service too, giving people access to their money when and how they want it, in record-breaking speed.
5G will provide faster and simpler payment options, which will make mobile and digital payments even more appealing to the masses and merchants alike, further boosting usage. This is key to economic growth.
The outbreak of Covid-19 led to an increase in digital payments by consumers, as it offered a contactless form of transaction and unparalleled convenience during the lockdown period. As a result, commerce – especially e-commerce – experienced the boost of a lifetime. This is a market where financial institutions can play a key role in expanding in 2021 with the help of 5G.
Another major advantage of 5G will be its ability for banks to improve proactive fraud prevention and take informed decisions in real time. Processing data, verifying the nature of transactions, confirming transaction amounts and funds availability, consulting multiple data instances in real time, coupled with customer geolocation and merchant ID, will reduce fraud detection errors and false positives, thereby protecting consumers and the bank’s bottom line.
With the introduction of 5G services, 4G will surpass 3G, which also means 3G and 4G will become more affordable to the masses. This will impact mobile and internet penetration, drive greater adoption and minimise the digital divide that exists globally and within nations.
In addition to 5G, the ongoing growth in mobile phone penetration will pave the way for a bigger and more sophisticated digital payments market. E-wallet services will enable mobile payments from a single account, empowering consumers as well as merchants and agents.
Small to medium-sized enterprises that are looking into ways to reopen safely without putting shoppers at risk could also adopt mobile wallets as a solution.
The UK financial sector should remain vigilant about tracking the progress of 5G and to focus on building the right experience for the customer at the right time. The opportunity is too big to ignore – not just for consumers, but for our economic growth.
Evgenia Loginova is co-founder and co-CEO of Radar Payments