As of 2020, the Internet of Things (IoT) has generated three trends that have driven the revolution in the banking and financial sector: the acceleration of digital payments; a massive growth of connected devices and the increased use of artificial intelligence.
The IoT transaction market generated more than $39.4 billion in revenue in 2022 globally. By 2030 the figure is projected to rise to $52.5 billion, with only devices that are designed and operated to make payments, according to Finance Online.
The Internet of Things is the network of physical objects that contain integrated technology to communicate, detect and/or interact with their internal states or the external environment, according to Gartner.
The smart devices we use every day such as cell phones, watches, televisions and computers are connected to the internet and to each other. These represent a type of technology that collects and shares data, creating connections immersed in financial management processes. IoT mainly benefits:
- Consumers and customers, providing them with a frictionless experience when making purchases, transfers and other operations, saving them time, effort and reducing stress.
- For merchants the possibility of offering a unique experience to their customers that contributes to loyalty and satisfaction, which translates into higher conversion rates and higher revenues.
- For financial service provider businesses creating new IoT-based offerings gives them the ability to integrate automated payments, innovative and comprehensive solutions, strengthening their value proposition.
What is the relationship between IoT and 5G technology?
Known as the fifth-generation wireless technology, 5G is the latest evolution of mobile communications and networks, with low latency and high-speed connectivity. This technology enables significant changes that can be highly leveraged. Let’s look at some of its features.
- Faster download speed provides more coverage and higher quality internet service.
- Machine learning and artificial intelligence make communication between devices and machine-to-machine learning simpler and more agile.
- Device enhancements allow for a better user experience, plus extensive connectivity and less wear and tear on battery life.
To understand the impact of 5G on the functionalities of financial solutions today, let’s look at a comparison with 3G and 4G networks.
| Functionality | 3G and 4G (2000 – 2022) | 5G (2022 onwards) |
| Main services | Mobile Banking
Digital payments Near Field Communication (NFC) Investments Customer Experience |
Chatbots
Remote Care Services Data protection Communication via video Digital wallets App Programming Interface (API) |
| Availability
|
Extended Office Hours
7×24 in Online Banking |
Uninterrupted hours of operation
|
| Products and/or transactions | Online payments
Transfers Personal Finance and Loans Insurance Risk and compliance |
One-touch payments
Hand-free transactions Payments through smart devices (watches, rings, handles, etc.). Single-level authentication (touch ID) |
| Fraud detection | PIN codes
SMS Mobile phone pairing Facial Recognition |
Biometric recognition |
| New products | Mobile Branch
International bank account number (IBAN) Digital Accounts Customer Service Department Cryptocurrencies |
Digital deposit apps
Advanced ATMs Photo invoice payment apps Virtual meetings Smart scanners (credit card, checks) Blockchain |
Source: 5G Technology and Future of Banking, Journal of Business & Economic Policy (2021).
5G technology introduced the improvement of capacities in digital financial ecosystems, boosting the offer of entities and the satisfaction of their customers. Customer experience optimization leverages augmented reality and virtual reality technologies, which enable, for example, remote virtual ATMs, financial, investment and lending advisors. It also helps financial solutions institutions optimize and automate their processes, reducing operating costs.
On the other hand, 5G payments reduce losses due to fraud, facilitating advances in security, such as the use of facial recognition or other biometric aspects to verify the identity of customers when performing various operations from mobile devices. These innovations allow agile access to your accounts and products without having to use a card, ensuring greater security.
Among the most common use cases of 5G in the financial sector today are:
- Mobile Branches
- Better and high contact with customers.
- Smarter and more hands-free channels.
- Biometric recognition to make payments and transactions.
- Security systems and intelligent surveillance.
5 steps to develop a 5G strategy
According to Deloitte, business needs must be transformed into technical requirements that deliver comprehensive, value-added 5G solutions. Let’s see the step by step to develop it.
- Select the areas that will be enhanced with 5G capabilities, identifying and prioritizing the main opportunities.
- Formulate the operational benefits of the value proposition of the identified use cases.
- Define the architecture to develop these capabilities, taking into account deployment strategies and application requirements.
- Start with a single point of contact to monitor and evaluate the performance of that 5G capability, then proceed with global deployment.
- Define the operating model and procedures to ensure sustainability in the business as usual.
5G technology drives the financial industry to another level thanks to automation with AI and ML. Its capabilities such as low latency and high connectivity drive the recognition, identification, evaluation and approval of operations. In addition, its digital security systems reduce the risk of fraud. The 5G network must be leveraged to create faster, more comprehensive, secure and reliable connections.
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