By Bharat Bhushan, Chief Technology Officer, Banking and Financial Markets at IBM

Telecommunications operators have been launching and expanding 5G infrastructure. According to CCS Insight, 5G consumer connections are set to triple by the end of 2021. This new infrastructure promises much faster internet speeds, lower latency, greater bandwidth, and the ability to handle connectivity to billions of devices. These attributes will enable the full realisation of symbiotic technologies such as the Internet of Things (IoT) and Edge Computing, where compute power is brought closer to the user to hugely improve response times.

5G, and the technological breakthroughs built on it as a next generation network, will unlock a world of possibilities for Financial Institutions (FIs), particularly in the following three areas.

Digital Experience
The pandemic has accelerated many trends, with all of us living our lives more digitally and remotely than ever. Some of these changes are likely to represent permanent shifts in consumer habits. In the last year, nearly six million people downloaded their mobile banking app for the first time as branches closed, call centre queues grew and waiting times increased. Millions of these new app users are likely to now use it as their primary touchpoint with their bank, and the demand for seamless, quality digital experiences will be higher than ever. At the same time, 5G coverage and smartphone availability are growing rapidly. Adoption will grow to 3.5 billion 5G subscriptions by the end of 2026, according to Ericsson.

5G can help exploit the compute and secure storage available on compatible mobile phones, which can be effectively used to enable and empower a rich set of self-service capabilities, such as:

• Extended Reality, which could help a customer understand their banking transactions, visualise paper statements so they are easy to understand, and manipulate and simulate what-if scenarios. For example, visualising buying a car and its expenses in relation to affordability and peer-level comparisons.

• Embedded high-quality video and interaction services, which could help conduct regulated activities such as financial advice and secured lending in-app, replacing lengthy face-to-face interactions
• Sensors in homes, vehicles, and offices, which can create highly personalised, real-time insurance offerings
• Banking drones and robots might seem like science fiction, but 5G will be a fundamental building block on which these breakthroughs are built

Branch Remodelling
Historically, bank branches were built to maintain local connections and serve the needs of a regional community. Society has largely outgrown the concept of a local branch in this traditional sense, and consumer habits have changed. Customers are using digital channels to find and buy products and our society is increasingly cashless.

5G provides an opportunity to reimagine and reinvigorate the role of the local branch, using the next generation network to become smarter, interconnected and data-driven. By connecting existing in-branch devices such as ATMs, Kiosks, and CCTV cameras, a bank can build a much richer understanding of footfall, services being delivered, the utilisation and design of spaces, and adherence to security and safety protocols.

Edge Computing can also allow for the repurposing of branches as pop-ups designed to serve remote communities, workspaces for employees who live locally, and ‘innovation centres’ for local businesses where they can meet and collaborate.  The branch becomes a place for matchmaking of those new relationships powered by technology and underpinned by revenue making products.

Embedded finance
Following their investments in digital transformation and open banking infrastructure, most forward-looking institutions are looking to take advantage by creating new platforms and/or joining existing ones.

For industries and professions that rely on heavy machinery  – agriculture for example, banks have the potential to provide holistic services to farmers and farming companies. Take agriculture, for example. 5G could enable ‘hailing-like’ services for expensive farming equipment, support smarter decision-making based on future weather forecasting data and soil quality services, and facilitate trades of the final produce. In such a value chain, a financial institution can embed traditional products such as payments, lending, and credit building. Technologies such as 5G, GPS, IoT and Edge Computing can enable predictive equipment maintenance, usage data, detailed mapping of farms, and more. Wide-ranging unstructured data could enable a further set of possibilities, such as working with machinery manufacturers to improve product designs and data monetisation opportunities with ordnance survey organisations.

In the consumer and retail industries, banks have the potential to use 5G in stores to create networks and consumer devices to make sub-second decisions about microlending to beat buy-now-pay-later companies at their own game that have impacted a bank’s credit card business in recent years.

In the era of a subscription economy, offering home appliances as-a-service where customers pay per use. The appliance retailer, manufacturer and the bank can work together to finance the appliances and orchestrate other platforms as needed to deliver supplementary products and services at the right time.

Preparing for the 5G era
The examples outlined here are all achievable, some quite easily from a technological perspective. A lot of the breakthroughs needed are already here. 5G will become ubiquitous.

But if they are to become reality, it will require a step-change in mentality.

Banks will need to think beyond their conventional business and operating models. And they will need to relinquish some control, realising that no one company can achieve all this alone. To solve real customer, industry and societal challenges, an entrepreneurial mindset is needed that does not try to solve everything alone. The FIs that succeed and seize the opportunities afforded by 5G will use partners for different part of the value chain and then rely on technologies to create a business platform. These partnerships could include 5G providers, manufacturers, information technology and systems integrators – all collaborating with a co-creation mindset to offer customers a better experience.