How latency affects everything from video calls to online trading

Ever been on a video call where you’re constantly talking over each other? Or played an online game where you swear you shot first, but you’re the one who got eliminated? If that’s true, then you’ve experienced the frustrating effects of latency. While it might seem like a minor annoyance, this digital delay impacts nearly every aspect of our online lives, from our daily communications to high-stakes financial transactions.

Let’s explore what latency really is, why it matters and how it shapes everything from a casual video chat to high-stakes trading floors.

What is latency?

At its simplest, latency is the time it takes for data to travel from one point to another and back again. In telecom terms, it’s the round-trip time (RTT) for data to travel from your device to a server and back again, measured in milliseconds (ms).

While a few milliseconds might seem trivial, in the digital world, those tiny delays can be the difference between:

• A smooth video call and an awkward conversation full of “sorry, you go ahead…”
• A winning stock trade and a missed opportunity
• A perfect headshot in an online game and a frustrating defeat

Latency is often confused with bandwidth, but it’s important to note that the two are not the same. Bandwidth is how much data can move at once, while latency is how long it takes to start moving. A highway with more lanes (bandwidth) doesn’t help much if there’s a traffic jam at the entrance (latency).

What causes latency?

Latency is rarely caused by a single factor. Instead, it’s the sum of multiple small delays along the data’s journey. Physical distance plays a role, since signals travel at finite speeds and global connections naturally take longer. Every router, switch and server along the path adds a small processing delay and if the network is busy, packets may have to wait in a queue.

Routing inefficiencies can force data to take longer paths than necessary, while older or slower hardware can introduce additional delays. The “last mile” between your device and your Internet Service Provider’s (ISP) core network can be especially unpredictable, particularly with Wi-Fi or mobile connections. Wireless technologies also bring their own quirks, as radio signals are affected by interference from walls, devices or weather. In the case of satellite internet, the sheer distance to orbit, especially with geostationary satellites, can add hundreds of milliseconds.

Everyday scenarios where latency plays a big role

Video calls and conferencing

When latency is low, video calls feel like a natural conversation. When it’s high, you get the dreaded “talk over” effect, frozen faces and awkward pauses. Even 100–200 ms of latency can disrupt the natural rhythm of conversation. High latency can also cause lip-sync issues where audio and video don’t match, a subtle but distracting effect.

Streaming and live broadcasts

For pre-recorded shows, latency is less of a problem because content is buffered. But for live sports or concerts, even a few seconds of delay can mean hearing your neighbour cheer for a goal before you see it.

Remote work and cloud applications

Whether you’re working on a shared document or running a virtual desktop, latency shapes how “snappy” things feel. Clicks should be instant because if they’re delayed, the whole experience feels sluggish. In fact, a mere extra 50–100 ms in latency can make cloud apps feel frustrating to use, even if your download speeds are high.

IoT, telemedicine and autonomous vehicles

Some applications require ultra-low latency, typically less than 1 ms in some cases. Here are some instances when this is needed:
Remote surgery: surgeons need instruments to respond instantly to their movements.
Autonomous cars: vehicle-to-vehicle communication must happen in near real time to avoid collisions.
Smart factories: sensors and machines must react instantly to avoid production errors.

In these contexts, high latency isn’t just inconvenient but it can be dangerous.

Meanwhile, for e-commerce, latency directly impacts sales. Studies have consistently shown that even a small delay in page load time can lead to a significant increase in the “bounce rate” – the percentage of visitors who leave after viewing only one page. If a website takes too long to load, customers get impatient and go to a competitor. In this context, low latency ensures a responsive shopping experience, which builds customer trust and boosts conversions.

Online gaming

Gamers often talk about “ping”, another term for latency and players live or die by it. It’s the delay between you pressing a button and the action happening on the screen. A ping of 30 ms feels instantaneous, but 200 ms can make your character react late, costing you the match. Your opponent, with a lower latency connection, sees your move and reacts before your action is even registered on the server. This is why serious gamers often invest in low-latency internet connections and connect to the closest game server possible.

Online trading

For most of us, trading over a home internet connection is fine. But in professional markets, being even slightly faster can mean making or losing millions. In fact, in high-frequency trading (HFT), algorithms execute thousands of orders per second. Traders rely on getting market data fractions of a second before their competitors to capitalise on tiny price fluctuations. A latency advantage of just a few milliseconds can be the difference between a profitable trade and a loss. This is why financial firms spend enormous sums to place their servers in the same data centres as stock exchanges, a practice known as “co-location,” to minimise physical distance and reduce latency to the absolute minimum.

How to measure latency

The simplest way to measure latency is with a ping test, which sends a small packet to a destination and measures how long it takes to return. For businesses, latency monitoring dashboards offer continuous oversight and trigger alerts if performance drops. When testing, pay attention to three key metrics. Ping refers to the round-trip time in milliseconds. Jitter describes the variation in latency between packets, with lower values indicating better performance, while acket loss refers to the percentage of packets that never reach their destination.
It’s important to note that all three interact with each other. For instance, high latency can increase jitter and jitter can contribute to packet loss.

How to reduce latency

While you can’t change the speed of light, you can take steps to reduce your latency and the fixes depend on who you are.

For individuals:

• Use a wired Ethernet connection instead of Wi-Fi.
• Place your router centrally and keep firmware updated.
• Close background apps that use bandwidth.

For businesses:

• Use content delivery networks (CDNs) to cache data closer to users.
• Choose fibre over copper for backbone connections.
• Deploy edge servers in key locations.
• Upgrade to modern networking hardware with faster processing.

The role of 5G, fibre and edge computing in reducing latency

5G networks are designed for ultra-low latency, targeting 1 ms in ideal conditions, which is a huge improvement over 4G’s typical 30–50 ms. Meanwhile, fibre optic connections reduce propagation delay compared to copper cables. On the other hand, edge computing moves processing closer to the user, avoiding the need to send data all the way to a central server before acting. These technologies combined mean that in the future, latency-sensitive applications like autonomous driving, remote surgery and VR will be more viable.

Read all about 5G, how it is causing a revolution and what the future of 5G looks like.

Latency as the new competitive metric in the future

As gigabit internet becomes common, bandwidth is no longer the bottleneck and latency takes its place. Industries are pushing toward “real-time everything,” where even small delays are unacceptable.

We’re seeing innovations like:

• 5G ultra-reliable low-latency communication (URLLC)
• Low-Earth orbit (LEO) satellite constellations like Starlink cutting satellite latency from ~600 ms to ~30–50 ms.
• Experiments in quantum networking for near-instantaneous communication.

From making our conversations flow more naturally to ensuring the stability of global financial markets, latency is a powerful, invisible force shaping our digital world. As we move towards an even more connected future with technologies like 5G and beyond, the race to lower latency will open doors to new applications and smoother digital experiences for everyone.