Will 5G be community banking’s future fast lane?

racecar photo illustration
Photo by Audrey Shtecinjo / Stocksy

The promise of 5G’s speed has made headlines for years, but communities across the U.S. are just now beginning to gain access to this technology. But is it worth the hype? Experts say the rollout of 5G network technology will bring a new level of connectivity and computing power for community banks and the customers they serve.

By Karen Epper Hoffman

The onslaught of more advanced technology is a mixed blessing. It promises huge benefits in the long term but can be costly and bring untold risk in the short term.

Such it is with the move to advanced 5G, or fifth generation, mobile telecommunications networks, the likes of which AT&T, Verizon and other providers have been rolling out across the country. As with previous telecom advancements, the move to 5G is being met with both optimism and concern by corporate customers, including community banks, because of its potential to better connect and speed up services, as well as its scattered and delayed rollout. While this new technology may not be widely available in the U.S. until 2025, banks are already weighing how the transition will affect them and how they can best prepare for it.

“It’s still very early days for 5G,” says Daniel W. Latimore, chief research officer for Celent LLC in Boston. Just as telecommunications companies previously rolled out 4G services initially to big cities, Latimore expects that Verizon and its competitors will roll out 5G in major urban areas first. “For community and smaller banks, this could solve the last-mile problem,” he adds, referring to the final leg of telecommunications networks delivering services to customers.

Latimore says the availability of 5G networks could make it easier and less expensive for banks to connect with retail and business customers in rural areas where it has been too difficult and costly to run high-speed fiber networks. The spread of 5G networks would make online and mobile banking and digital payments services more accessible to these customers.

Maria Schuld, a division executive for FIS North America Banking Services Group based in Milwaukee, posits that “early coverage is still focused on large cities, so the impact to smaller financial institutions might vary, as 5G coverage won’t be ubiquitous for several years.”

To that end, Suresh Ramamurthi, chairman and chief technology officer for $87 million-asset CBW Bank in Weir, Kan., says the community bank is only recently rolling out access to 5G networks.

Nicole Harper, a senior strategic initiatives analyst for Jack Henry & Associates based in Dallas, says, “5G is much more than a better mobile network. It will significantly improve the application of transformative technologies like AI [artificial intelligence], the Internet of Things [IoT] or machine-to-machine communication, autonomous vehicles, smart cities and more.”

Emmett Higdon, Javelin Strategy & Research’s director of digital banking, in Pleasanton, Calif., says the availability of 5G-compatible handsets, is likely to be an issue for the next several years, as consumers keep current handsets longer. “We’re still trying to make the most of 4G,” Higdon says.

Meanwhile, Joe Fazio, chairman, CEO and cofounder of $750 million-asset Commerce State Bank in West Bend, Wis., says 5G will roll out in part of the community bank’s service area as soon as this year. While news of ongoing technology rollouts in other areas seem to be “relatively seamless,” Fazio says his community bank and others in the same boat must consider “usability and application questions” surrounding 5G.

Given the mix of urban and rural markets that Commerce State Bank serves, Fazio, his fellow executives and the community bank’s IT team have likely spent more time than many community bank leaders considering how this telecommunications innovation may affect customers in varying geographies. Similarly, in reviewing 5G, Latimore recently altered his view from being skeptical about 5G’s impact to seeing the technology as one that will have a “profound” influence on retail banking within the next three to five years.

According to an AT&T and International Data Group (IDG) study, eight in 10 financial institutions of all sizes are already making technology changes in operations, branches and other delivery channels to accommodate the move to 5G networks.

“It is like going from rabbit ears to cable on your TV, or from dial-up to broadband … It will spur more applications and access to more content that we have not yet thought of.”
—Joe Fazio, Commerce State Bank

“Once we have it, the question becomes, ‘How do we use it?’” Fazio says, adding that “just as the smartphone changed the way people interact with their bank, 5G could change those interactions, too.” He expects the growing access to high-speed connectivity will give rise to more services that customers can use in the mortgage application process, new alternatives for payments and money transfer, as well as widespread video conferencing in branches and remotely.

“It is like going from rabbit ears to cable on your TV, or from dial-up to broadband for your internet,” Fazio says. “It will spur more applications and access to more content that we have not yet thought of.”

5G’s countless use cases

While 5G offers great promise in terms of advancing banking operations and consumer-facing services through multiple channels, a 2019 Accenture survey of more than 1,800 global business and technology executives found that more than half aren’t sure if 5G technology can provide more than existing 4G networks can. More than one-third of the respondents report seeing 5G creating a “revolutionary” shift in business communications.

But just as Tom Cruise’s character in Top Gun “felt the need, the need for speed,” Harper says the faster throughput of 5G networks “will eliminate the buffering and delays that ruin the digital multimedia experience. Latency will shrink to as low as one millisecond, making video communication almost seamless.” It’s not just that 5G will enable brand-new services and applications; it will also “improve the performance of chatbots and voice assistants by boosting the speed of the artificial intelligence operating behind the scenes,” she adds. “Chatbots will respond faster and have more human-like conversations without awkward pauses to find information.”

Harper says customers will be able to further connect to millions of IoT devices, from smart home devices to home appliances, and access banking and payments services. Customers will be able to video chat with their community banker without lag, she adds.

The secret to 5G’s speed

Not all technological advancements live up to the hype. But in the case of 5G, the hype may well be justified.

Suresh Ramamurthi, chairman and chief technology officer at CBW Bank in Weir, Kan., says 5G can run at least 20 times faster than the current 4G networks, offering download speeds of 1Gbps and up to 10Gbps. Even according to more conservative estimates based on real-world testing, 5G is already more than 10 times faster than 4G networks, according to Maria Schuld, division executive for FIS North America Banking Services Group in Milwaukee.

The 5G wireless standard comprises low-, mid- and high-band spectrums, and 5G networks operate on different frequencies, with sub-6 GHz and millimeter wave (24–100 GHz) at the low and high ends of the spectrum, according to Nicole Harper, senior strategic initiatives analyst for Jack Henry & Associates in Dallas.

“Millimeter-wave frequency was previously unused, so 5G gives carriers access to the spectrum that will enable faster speeds,” Harper says. “5G networks can transmit ultra-fast data to a lot more users with high precision and low latency.”

For non-experts, these spectrums are the secrets to 5G’s increased speeds and bandwidth. “With their full potential,” Harper says, “these technologies offer blazing speeds that older wireless technologies haven’t delivered.”

At this point, there is little doubt that when 5G is in place, it will provide better digital performance and communication through a variety of delivery channels. But getting from here to there may take a while, according to bankers and technology experts. “Telcos not only need to get it into various locations,” Latimore says, “they will need to get 5G hardware, … including routers and tablets and mobile devices, in place. And, to provide the best 5G speeds, banks may need to rearchitect their software so that it no longer sits in the branch, but in the cloud or on a remote server.”

With the right hardware, software or vendor support in place, Latimore believes community banks and their customers will be able to connect and utilize services “that might not have been feasible before.” In-branch and mobile or online video conferencing is one option. Being able to provide real-time translations for non-native speakers is another. Functionality for ATM and mobile services will be more easily updated, facilitating continual or frequent improvements for banks and their core and application providers. In the short term, this may mean that “the complexion of technology spending [by community banks] may change from spending on hardware and software to spending on data. That has yet to play out,” he adds.

Fazio has considered how the introductions of 5G may allow for “better and cheaper video conferencing … [where] you can push more information across,” and use such technology for deposit-gathering or even more complex services like video loan closing, facilitating the movement of title searches and loan signatures, supported by facial recognition or other types of bandwidth-intensive authentication. Meanwhile, on the operational side, 5G could usher in more “real-time monitoring of asset liability, bonds and bank assets,” as well as greater opportunities to track and trend and graph real-time economic events, leveraging more expertise, Fazio adds.

“This also means that customers who can download an entire movie in seconds on 5G will expect their bank’s digital offerings to be equally fast and responsive.”
—Suresh Ramamurthi, CBW Bank

Ramamurthi says the availability of 5G means that wireless networks will offer as much speed and capacity as wired networks, but the widespread adoption of this technology will also increase customer expectations across all industries and service providers.

“With a 5G network, you can get download speeds of 1Gbps and theoretically up to 10Gbps, as fast as wired network speeds of previous years,” he says. “This also means that customers who can download an entire movie in seconds on 5G will expect their bank’s digital offerings to be equally fast and responsive.”

When can you expect 5G?

There is little doubt that 5G wireless networks are coming, but when, exactly, depends on where your community bank is.

As is typical with the rollout of new technology, wireless carriers like Verizon and AT&T are focused on urban areas where there’s not only a greater concentration of mobile subscribers, but more consumers and businesses likely to utilize premium wireless services and to have the hardware and software to support them.

Case in point: Verizon established 5G networks in about 30 cities in 2019, including Minneapolis and Chicago, while AT&T created a beachhead for its 5G network in more than 20 U.S. cities, including Dallas. Smartphone manufacturers, such as Motorola and Samsung, are already selling 5G-capable phones.

Experts believe it could be five years before there is widespread 5G coverage throughout most geographies, since these networks, while faster and offering more capacity, simply cannot extend as far as 4G networks and will require more transmission nodes. Still, Maria Schuld, division executive for FIS North America Banking Services Group in Milwaukee, says “banks of all sizes should be prepared for the early adopters.

“The coverage maps are one aspect, but another is the availability of 5G-compatible devices,” she says. “There are not a huge number of these phones, and the strategy from a community bank should look at both angles—their banker and bank operations personnel and their customers—as more of these devices hit the market.”

Karen Epper Hoffman is a writer in Washington state.