How 5G will impact payment processing in 2021 and beyond

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If you follow current events, you’ve probably heard about 5G and how it will change life as we know it. In fact, 5G is becoming more widely adopted and is quickly revealing its impact and potential.

For payment processing, 5G will impact latency, scalability, and efficiency. Through innovation, 5G can significantly optimize payment processing to meet evolving consumer demands.

As businesses continue to embrace digital and mobile services, it’s important to understand the impact of 5G. This article will look at how 5G relates to payment processing and discuss four key impacts we expect to see.

What is 5G?

The term “5G” is widely used these days – but how many of us actually know what 5G is?

Starting in 2019, cellular companies began releasing the fifth generation of cellular technology. This generation is known as 5G.

In short, 5G is a network and technology that enables mobile devices to interact with each other and transfer data. As a result, 5G experts expect this generation to significantly improve the usefulness and efficiency of cellular networks.

Benefits of 5G include:

• Enhanced speeds: 5G delivers significantly faster speeds — 10 to 100 times faster than its predecessor, 4G. This means downloads and streaming will run faster and smoother.
• Increased bandwidth: 5G networks can transmit significantly larger amounts of data than previous generations. This allows for seamless connectivity despite heavy internet usage.
• Greater Capacity: A significant advantage of 5G is its ability to handle up to 1,000 times more capacity than 4G. This enables more devices to communicate and supports larger-scale operations.

What does 5G have to do with payment processing?

5G has the potential to reshape the payments process as we know it.

Traditional financial transactions involve the physical exchange of money or the use of payment cards.

This way of doing business has evolved naturally as e-commerce and fintech have paved the way for virtual services. Now, most transactions can be conducted digitally.

As it stands, consumers can access many other payment methods through their mobile devices. With the widespread adoption of 5G, we will see a dramatic change in the possibilities of payment processing. Customers will have more choices and personalized information than ever before.

Key impacts of 5G on payment processing

Whether you’re a merchant, business owner, or consumer, it’s critical to understand how 5G will impact payment processing.

Below, we identify four major impacts that 5G will have on payments in the coming years.

1. Reduce latency

Latency is the time it takes for a signal to travel from the source to the receiver and then back to the original signal.

With each new generation of cellular networks, a major goal is to reduce latency more each time. As a result, 5G has the best latency of all its predecessors. The main factor limiting latency reduction is human reaction speed, not machine reaction speed.

By reducing the time it takes for a signal to reach its destination and illegal replies, many transactional errors can be avoided. In addition, we can significantly reduce the time it takes to receive payment confirmation.

Further benefits of reduced latency include:

• Higher customer satisfaction: The less time your customers have to wait for their payment, the better. If customers have to put up with high delays, they may end up canceling the transaction altogether.
• Improved Accuracy: Increased latency makes identity verification easier and more accurate thanks to lower latency, allowing for faster transmission of critical data.
• Streamlining transactions: With 5G, payment transactions will be faster and simpler than ever before. With 5G, companies can also streamline the processes that come with more important purchases. These include applications or credit checks.

2. Improved security

As cellular and internet networks adopt 5G, the security of your financial data will become a priority.

In addition to passwords, 5G will place greater emphasis on biometric authentication. This includes facial and fingerprint recognition, among others. Experts believe that these 5G biometric technologies will be more efficient and accurate.

We may also see an expansion of biometric security measures spread using 5G. One potential example is the ability to authorize purchases simply by facial recognition.

Here are three key benefits of 5G in payment security:

• Better data encryption: 5G ensures that minimal data is left to be intercepted for tracking or spoofing. This makes it harder for hackers and malware to manipulate network devices and connections. Ultimately, this makes fraud easier to prevent.
• Cloud-based: 5G is more dependent on cloud computing than previous generations. By utilizing cloud-based systems, 5G can more easily monitor for potential threats.
• Network slicing: 5G makes network slicing possible. This is the practice of segmenting a system into smaller, more manageable networks. This allows for more specific protection and security measures to be deployed.

3. Increased use of the Internet of Things

It is widely predicted that the adoption of 5G will also help to popularize Internet of Things (IoT) applications.

The Internet of Things is a term used to refer to the entirety of physical devices that are connected to the global internet. Therefore, any device that can be connected to the internet can also function as an IoT device. This includes any physical object that can be controlled through an internet connection, such as a light that can be turned off and on remotely.

This means that payments can come from a variety of IoT devices as long as they are part of the same network.

According to a recently released NewNet white paper:

“IoT payments from rapidly emerging connected devices, wearables and smart gadgets will generate payment volumes that could soon replicate or exceed the volumes of current payment types for mobile, web or in-store purchases.”

Additionally, we will see more and more blockchain systems being used in conjunction with the Internet of Things. Blockchain IoT enables more secure payments and transaction transparency.

The benefits of blockchain IoT for payment processing include:

• Speeding up transactions: 5G IoT systems on their own may struggle to reduce latency. When paired with a blockchain system, transaction authorization can occur within seconds.
• Reduced risk: Blockchain is known to be highly secure. With blockchain IoT, payments are at much lower risk of being tampered with, tracked, and subject to other digital dangers.
• Reduced costs: IoT systems reduce overhead and operational costs. This is especially true if the system is blockchain-based. This cost reduction is then reflected in reduced digital payments and transaction fees.

4. Increase the popularity of e-wallets

While e-wallets existed before 5G, their popularity is sure to increase as 5G becomes more widely accepted.

An e-wallet is an application that allows you to make payments through your mobile device. A very popular example of an e-wallet is Apple Pay. This payment service securely stores your debit or credit card information. So, you can make purchases as you wish.

5G inherently supports mobile payments and mobile commerce. For users of e-wallets, this means that the speed and security of transactions can be greatly improved when paired with 5G networks. In turn, we will see more people willing to accept digital payment systems and open their own e-wallet accounts.

Here are three key ways 5G will positively impact e-wallets:

• Enhanced biometric security: With 5G, e-wallets will benefit from faster verification and multi-factor authentication. Enhanced biometric security measures enable more devices to process digital payments.
• Increase in online shopping: 5G enables e-wallets to provide a seamless shopping experience. From shopping to checkout, 5G helps streamline the entire process. This could lead to a sharp increase in the use of e-wallets for online shopping.
• Enable wearables: Wearables, such as smartwatches, will become even more useful with the help of 5G. Your sensitive financial data will be securely stored while being easily shared across all enabled devices.

Conclusion: When will 5G for payments be widely adopted?

As 5G becomes more widely adopted, the payments processing industry will undergo an equally significant evolution.

5G experts promise that payments will be more transparent and efficient. This is possible due to the reduced latency of 5G. In addition, 5G supports biometric authorization, which can increase transaction security.

As for when we can start seeing these changes – the answer is now.

Major cellular network providers have already begun rolling out 5G. The transition from 4G to 5G won’t happen overnight. However, we’re already seeing the benefits of the next generation.

When it comes to payment technology, 5G will be an excellent enabler for mobile payments. 5G will allow consumers to make secure, on-demand purchases in seconds.

Success in the coming years will depend on each business’s willingness to adapt. Businesses and merchants that adapt quickly will be the first to reap the many rewards that 5G offers for payment processing.