Financial Services

What Are the Risks of 5G in Financial Services?


Previously, I went into detail as to why banks should care about the new technology and how it affects mobility, payments, pop-up branches, and omnichannel experiences. My next blog outlines the potential risks associated with 5G.

From a strategic planning perspective, it’s important not to believe all the hype, to understand there are potential risks to consider, and to be sure to separate fact from fiction by keeping the following things in mind.

5G Rollout Won’t Be as Fast as the Major Carriers Want You to Believe

One would think that based on the television commercials AT&T and Verizon are running, 5G is already here. In the early rollouts, 5G devices will need 4G to make initial connections before trading up to 5G where it’s available. These hybrid 4G/5G networks are called “non-standalone” (NSA) networks. Sometime in the future, 5G networks will become “standalone” (SA), not requiring 4G coverage to work.

Many of the more elaborate future 5G use cases will need SA 5G networks. Some carriers who want to be first to offer 5G will start with NSA 5G and, once 5G coverage is established, implement standalone 5G. But there will be other carriers who opt to go straight from 4G to SA 5G, especially if their business models are focused on ultra-low latency and high-speed data applications. The path a particular carrier takes will depend on its specific business goals and requirements.

Remember, a lot of good old-fashioned work needs to be done, including cables and trenches, processors and poles, compatible phones and data centers. With much of the technology hardware itself part of global trade disputes, concerns over security (think China’s Huawei), regulatory, and spectrum disagreements and local debates over zoning, public space, and public health will slow supply chains and delay installations.

Infrastructural Clutter Misconceptions

Many people believe 5G is synonymous with millimeter-wave, a very short-range, high-speed frequency band. Millimeter-wave signals don’t travel as far as 4G’s signals – around 1,000 feet – as opposed to 4G’s reach of several miles, and they are susceptible to obstacles like walls, trees, windows, and weather, requiring a much-denser network of cellular base stations placed roughly every 500 feet along residential and commercial streets.

The FCC has removed environmental and historical protection reviews for low 5G installations and stipulated that cities have only a limited period of time to approve or reject carriers’ applications for new cells. Local officials want to retain control over 5G’s infrastructural clutter to maintain property values, sidewalk space, and the transformation of streetscapes.

States are fighting back, elevating the dispute over local control of public rights-of-way to the federal level. Already, half have enacted legislation that preempts local zoning authority in preparation for the 5G buildout. The Federal Communications Commission (FCC) and Congress are now working to develop and implement national standards.

Upon completion, we will see an agreement that greenlights a rapid zoning and permitting process for right-of-way use to install antennas, power supplies, electric meters, switches, cabling and boxes onto existing streetlights, utility poles, and buildings.

Others believe that millimeter-wave towers on every lamppost are not accurate. That’s how some US carriers are choosing to implement 5G right now, but it’s not a necessary or required form of 5G.

Unless you are a wireless engineer, it really isn’t important to know all the technical details. However, as a strategic planner for a financial services firm, it is important to know that there will be both slow (but responsive) 5G and fast 5G with limited coverage. Knowing your customers’ location (urban/rural), the carriers they use, and the carriers’ 5G implementation strategies will be an important consideration determining how satisfying your mobile users find your early 5G applications.

Health Controversies

In 2018, the American Cancer Society said that cell towers’ radiofrequency waves are “non-ionizing radiation,” which means that “they do not directly damage the DNA inside cells,” as do X-rays, gamma rays, and UV light. However, there are studies offering evidence that wireless has harmful effects on health.

There is no shortage of advocacy groups arguing that the telecom companies interfere with wireless research and advocating for a delay of 5G’s deployment until further studies can be completed. Several towns in California have passed urgency ordinances prohibiting wireless towers in residential areas because the health and safety of the community might be at risk. Similar concerns – about invasion and irradiation – have accompanied other new technologies, from electricity to radio to, not long ago, 4G.

Personal Privacy Breaches

5G’s increased bandwidth will allow for the networking of millions of sensors and cameras, enabling a massive customer data collection network. Optimization and customization of services will be made possible because of more thorough customer surveillance. This will increase each bank’s responsibility to protect customer data, and that responsibility probably goes past just checking the boxes on General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). It may actually require a complete internal review of existing data policies within your company.

Internal IT Infrastructure Performance

For mobile applications to take advantage of all the capabilities offered by 5G technology, more enterprise infrastructure will need to be deployed at the edge rather than in corporate data centers. Huge, centralized data centers are often too remote to take advantage of 5G’s efficiencies, like the reductions in latency. Banks without modern IT infrastructures that are virtualized, containerized, and software-defined to support edge computing may be disappointed in their 5G offerings as they wait for their internal infrastructure to catch up.

To learn more about what 5G is exactly, why banks should care, the benefits and challenges of the new service, and what banks should be doing to prepare for the change, you can click here or submit the form below.

This blog was co-authored by Jonathan Crockett.

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Scott Albahary, Chief Strategist, Financial Services

Scott Albahary applies his wide range of knowledge and skills to advise Perficient’s financial services clients on business and technical strategies and on defining, developing, and implementing these specific strategies.

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