Mobile Money: IoT and 5g connectivity in finserve

Not so long ago, 3G was the transformative technology of the decade. It opened up a world of possibilities for finserve customers, initially through the advent of mobile banking. However, 3G was limited; slow, and rather insecure depending on if you were using a public network. Its days were limited when 4G arrived. 

Since then, the fintech industry has taken off on a global scale and completely transformed the financial services space. We have e-wallets and ApplePay, open banking and BNPL, and cross-border, real-time, low-cost transaction options. We have crypto exchanges and can manage all manner of services via our mobile devices. Insurtechs are also revolutionising underwriting and claims through wearables and telematics technology.

The IoT and the customer space

But more than that, the development of the mobile network as part of the IoT, has resulted in many more data sources, taking information from sensors, computers, smart home appliances, and more, which when aggregated can create the ultimate customer profile for service providers. 

These KYC developments have, in turn, transformed other industries, not least of which has been the finserve space. 

But if 4G has been capable of creating these developments, what milestones will 5G usher in? With an average performance that is 100 times faster than 4G, with higher bandwidth and low latency, the possibilities, say, experts, are endless.

Manish Devgan is Chief Product Officer at Hazelcast, a leading open-source in-memory computing platform, that helps Global 2000 and financial services companies to achieve ultra-fast application performance.

He says, “In the finserve industry, higher bandwidth, lower latency and more reliable networks provided by 5G will create a foundation for secure, real-time applications and services. 

“Pervasive data streams fuelled by ubiquitous connectivity will require real-time platforms that combine disparate data, filter and aggregate data, and leverage artificial intelligence, to provide actionable intelligence.

Devgan predicts that drawing on 5G's benefits, mobile and wearable device-initiated commerce has the potential to grow at a much faster pace. 5G networks will, for example, enable real-time fraud-checks catapulting mobile payments to mainstream adoption. 

Boris Cipot, senior security engineer for Synopsys Software Integrity Group agrees with Devgan. He believes the anticipated changes to finserve as a result of 5G innovations, will be industry-changing. 

“To quote Marc Andreessen, ‘software is eating the world’,” he says. “5G is the next phase of better connectivity and faster data transfer speeds. The next-generation mobile network will enable not only more advances for fintech and financial services, but it will also allow for continued security maturation within the industry as well.”

A question of data

Although speed of delivery, many more data points, and greater amounts of information being gathered, all point to the possibility of sharper insights, better risk assessment, and more accurate customer preferences, it also brings a raft of pitfalls with it.

Data gravity is already a problem for many large-scale operatives. The more data companies gather, and the more devices being used, increases the digital footprint, resulting in greater opportunities for data to be compromised or stolen. 

And the cost of lost data, as well as poor management of it, can result in harsh penalties. Recently in the UK, for example, the courts ruled that a man using several smart doorbells on the exterior of his house to provide him with better property security has breached the data rights of his neighbour, who was incidentally filmed by the devices. The courts ruled in her favour and he was forced to sell his home to pay the resulting fine. 

In a recent annual report by IBM, the technology giant revealled that the cost of lost data to companies in the USA in 2021, was a massive US$4.24bn. That was the highest yearly figure reported by the study, since it was first issued in 2003.

Greater connectivity will almost certainly result in greater risk, says Mark White, Senior Manager, Financial Markets and Fintech at Telehouse. “Ultimately, more connections mean more risks. So, the challenge is how to take advantage of increased connectivity without compromising security or compliance.” 

White points out that the digital ecosystem is coming into its own and offering solutions to this most pressing of problems. “Many are turning to colocation as the answer; providing the connections to strategic partners fintechs need while ensuring infrastructure remains secure, resilient, PCI, EBA, and FCA compliant.”

Jonathan Knudsen, senior security strategist, Synopsys Software Integrity Group, also sheds some light on the situation. 

“The underlying theme, in financial services and everywhere else, is cybersecurity,” he says. “Our appetite for functionality and interconnectivity has far outrun our ability to build, deploy, and operate software securely. A continuous parade of headlines about data breaches, leakages, compromises, and other doom and gloom reveals that the software that serves as the foundational layer for our society is brittle and porous.”

Knudsen says that as more devices go online and more of the day-to-day operations of the human species become an exchange of electrical impulses in cyberspace, security and software will become inseparable. 

“Everyone will recognise that security must be part of every phase of software, from its design and creation through to its testing, deployment, and operation. In the same way that safety is woven inextricably into the fabric of automobile manufacturing, cybersecurity will be woven inextricably into the fabric of software—how it is built, how it is deployed, and how it is operated.”

Real-time applications

According to a recent analysis, by the Global 5G Technology & Volume Forecast Report 2021, the worldwide 5G technology market size was valued at US$4.10bn in 2020. 

As long as security protocols are correctly observed, 5G, better connectivity, and an increase in devices will also result in a boost for the software industry. In fact, the new 5G technology is estimated to provide various vital benefits to numerous sectors such as IT and telecoms,  utilities and manufacturing, entertainment and media, transportation, aerospace, defense, healthcare, and logistics. 

“Improved connectivity will not only increase data volumes but also result in velocity enabling a whole new breed of real-time applications,” says Devgan.

He points out that a consumer’s behavioural data can be analysed in real-time to provide more context-aware recommendations. As a result, fintechs now need to instantly understand customers (particularly those influenced by online trends) and increasingly process data streams as the data is generated.

In addition, he says, it will be much easier to process an insurance claim in real-time by combining weather data with traffic conditions, vehicle and road conditions, photographs from the accident site, and driver’s history. 

“5G ultra-low latency use cases will require a combination of 5G networks and edge computing. Data analytics and artificial intelligence (AI) remain very challenging at the edge because available computing power is often limited by physical space. Faster edge data processing demands a data architecture that capitalises on advantages in both the software and memory layers.”

Infrastructure changes required

However, there will need to be swift changes implemented sooner rather than later. Although 5G has already been rolled out in pilot areas globally, there are still relatively few apps that require its features. Similarly, the commercial sector will also have to implement a number of changes to facilitate the new technology. 

Devgan points out that most edge sites don’t have the space for hardware infrastructure based on servers in data centres. However, he believes this problem can be resolved by running a streaming engine - which can handle both historical data (data at rest) and data in motion (such as browsing products on an iphone). 

“These capabilities are essential for the ingestion, transformation, distribution and synchronisation of data streams as soon as they are created,” he says. 

"It’s also crucial that a data streaming tool has a streamlined code base - in other words, that developers don’t have to write complex applications to handle those multiple data streams. 

“Another prerequisite for fintechs seeking to individually-target services for consumers through instant data processing at the edge is a better use of system memory. This breakthrough can be achieved by pooling memory for applications using sets of networked, clustered servers - this approach enables the infrastructure to share data structures with other applications running in the cluster.”

The future face of finserve

With all this in mind, predicting the trends and innovations that will take place in the finserve space over the next decade, is no easy task. But experts have their suspicions in terms of where the key developments will take place. 

Cipot says, “In a decade, I anticipate paper money will have disappeared. In its place, payment methods via smart devices will be the standard, preferred payment method—even over and above card transactions. We’re already seeing many regions of the globe moving in that direction rather rapidly.”

White agrees but also points out that the new technology will provide endless opportunities for customers to enjoy tailored products that provide complete flexibility. “Financial service providers have a huge opportunity to provide the seamless, secure, and personalised services that today’s consumers crave. But doing so will require a digital transformation. They will need to simplify their business and operating models to enhance customer service and structurally reduce cost.”

As data volumes and connectivity increase, he says we can expect to see new developments such as predictive modeling to prepare for ‘what if’ scenarios, automation of front-end sales and customer-facing environments, and customer care being enhanced by self-service functionality.

White adds, “Having the right IT infrastructure to enable fast, secure, and seamless connections will be critical for success.”

Which UK networks offer 5G so far?

• EE
• O2
• Vodafone
• Virgin Media
• Three UK
• BT
• Sky Mobile
• HMD Global