Everybody is talking about the new super-fast 5G connection standard – but the huge potential of 5G for payment has hardly been discussed so far. 5G will revolutionize the way we shop, pay and use financial services in the future, and we’ll show you how.
We’re on the cusp of the fifth major revolution in mobile telecoms – and it’s likely to have a disruptive impact on payment providers, merchants and other players in the financial services ecosystem.
5G is an exciting new generation of mobile connectivity. It follows the previous generations: with the 1G being basic voice services, 2G representing being rudimentary internet connectivity, and 3G accelerating the pace. 4G brings us to where we are today: where one can access a wide array of digital services from a mobile network.
While these advances have been incremental, 5G will be an exponential leap forward. 5G brings together a host of new breakthroughs which will give us network speeds and boosted performance hundreds of times better than our current mobile networks.
Let’s jump into the technology itself for a moment. 5G is fundamentally different from what came before. Signals can be beamed through buildings and across vast areas, and astonishing data volumes can be transferred almost instantaneously.
So, just why is this technology so important? Firstly, it’s needed to bring to life those exciting futuristic concepts, the likes of self-driving cars, remote medical surgery, AI robots, connected cities, immersive virtual realities, intelligent agriculture, drone deliveries, and more.
5G also paves the way for “Industry 4.0,” the new era of digital business, where a fusion of technologies blur the lines between the physical, digital and biological realms – opening up entirely new business models and consumer services that could enhance and simplify our lives.
But a very important and fascinating area has hardly been discussed so far: What does 5G mean for the world of payment? Here are what we see as the most important aspects of how 5G will revolutionize the way we pay and manage our finances:
1. Pay fast and furious: 5G accelerates speed for consumers
In the 5G era, merchants, consumers, smart connected devices and other players are linked together in real-time, with no lags, jitters, drops in connection, timeout errors or other connection issues.
The sheer speed and performance of 5G allows us to instantly make digital payments from a variety of devices – including the likes of wearables and connected devices – meaning one can buy just about anything, from wherever they happen to be. A purchase can be completed with a single click, tap, voice command, or gesture.
5G also speeds up in-store payment experiences, making lines move faster and allowing retailers to effectively ‘untether the point-of-sale.’ Customers can checkout from anywhere in the store via a smart device managed by sales staff, that is seamlessly linked to a multitude of systems including financial, inventory, and loyalty.
Increases in the speed, convenience and coverage of our networks will further promote the shift from physical cash to digital payments, mobile banking and mobile wallets.
Peering deeper into the architecture of payments, 5G could speed up transaction processing between banks, clearing houses, issuers and merchants. Ultimately leading to earlier settlements for merchants and the opportunity to put that money to work.
For consumers, payments become interwoven with so many of our favorite digital services. See an outfit that you like on Instagram? With 5G, you can ‘try it on’ using augmented reality, instantly make your payment and have the order dispatched. All this in just a matter of seconds!
5G's ability to process huge amounts of data in a very short time makes “big ticket” purchases much easier as well: Let’s take financing and buying cars as an example. In the 5G era, we could effectively compress dozens of related digital interactions into mere milliseconds: from applying for credit, to getting approval, securing financing, checking the vehicle against national databases, registering and getting a handful of insurance quotes in order to choose the best one.
However, the impact of 5G on payments won’t just be felt in mainstream consumer environments like this. Consider the purchases of large tranches of company stock, for instance, which may have to pass certain legal, governance and other processes before shares are transferred to new ownership. With 5G, the interplays between these various systems can be instant.
Businesses would be able to securely and instantly purchase assets and services from one another, as the various contractual and due diligence processes rapidly accelerate. Ultimately, 5G brings greater liquidity and activity into business ecosystems.
5G will revolutionize payment - giving not only consumers but also merchants more speed, security and convenience, and a whole new way to offer their customers a seamless shopping experience #5G
2. 5G accelerates security processes to protect payments against emerging threats
As the shift towards digital continues, the unfortunate side effect is that in the area of cybercrime, the stakes get higher and the tactics become more sophisticated and devastating. Our current cybersecurity defenses – PINs, passwords and OTPs – are unlikely to hold up against future threats.
For payments providers and merchants however, 5G allows exponentially more data to travel across secure networks in real-time. This makes truly proactive fraud prevention possible. Payment firms could analyze data like location, transaction amounts, and merchant IDs and immediately raise a flag if something feels unusual about the transaction.
Better yet, these insights can be meshed with subtle indicators from the user including regular behaviors or movements that validate the user’s true identity. All of this can be combined with formal biometric identity (such as face, fingerprint or voice) to provide truly multi-layered, multimodal security for users.
3. 5G unleashes the potential of related technologies
It’s important to look beyond 5G’s immediate impact on the world of payments, and note its role as a catalyst in a multitude of other related technologies. As this Statista infographic shows, 5G is exponentially more powerful than our current paradigms of 3G and 4G.
These technologies coalesce together and build on one another, potentially reshaping the way we pay. For instance, when renting a car, the agency could automatically bill your credit card as you fill up with gas, pass toll gates or stop at a drive-thru (all with no action required by the driver).
In the 5G era, with broader coverage and no jitters, what’s stopping us from making payments using new virtual currencies from wearables such as a smartwatch?
We’ll be able to fluidly step between physical environments such as brick-and-mortar shops, into immersive virtual realities and digital games, and make purchases just as securely and easily. In time, we probably won’t notice the difference between the real and the virtual… and the payments will be just as real!
4. 5G reaches more customers, in more personalized ways
Many payment providers and other financial services firms dream of a state where they’re able to provide tailored 1:1 service to every individual, even if they have millions of users.
Aided by modern 5G networks and limitlessly scalable data-crunching platforms, industry players could gather rich seams of data from a variety of sources. When analyzed in an intelligent and automated way, these data-points allow them to draw a detailed picture of each customer. With these insights, highly-targeted and personalized engagements become possible.
For payment players, there’s an opportunity to move into exciting, high-value domains, offering additional value to customers at the moment of payment. So, for instance, if the customer is buying a new camera, you could curate a few different financing options, or send alerts when a new type of lens becomes available, or engage with e-learning platforms and bargain for discounted photography courses. The possibilities are endless and 5G, thanks to its data speed, makes it easier than ever to analyze a large amount of data smartly and respond much more individually to a huge number of customers - to enable a seamless shopping experience.
It’s not just about enhancing the share-of-wallet for existing customers. In time, 5G has the potential to reach deep into rural areas and developing regions where internet hasn’t ever been commercially viable. Suddenly, vast numbers of previously-underserved customers could be brought into the digital economy, enticed by the convenience of digital payments.
As we have shown, 5G will revolutionize payment among many other areas - giving not only consumers but also merchants more speed, security and convenience, and a whole new way to offer their customers a seamless shopping experience.
And we are not talking about a distant vision of a future technology here, but 5G technology is, in fact, already here. In the second half of 2019, the momentum quickly gathered pace, with many 5G deployments announced across the world. The scene is set for 5G to ignite the telecoms landscape in 2020, as more and more businesses start to see the potential.