How Digital Twin Technology is Disrupting Banking Services
As banks make incremental progress toward full digital transformation, there are still many hurdles to clear. Banks must address challenges including the cost and time to upgrade existing technology platforms, the need for internal cross-functional collaboration, and the effort to balance the customer experience with ever-evolving consumer expectations.
As replicas of the real, digital twins can enable informed decision-making predicated on actual interactions of complex systems. They can provide fact-based insights, rather than merely informed guesses. And that’s what makes them so potent a weapon in any bank’s arsenal.
Could digital twins provide a path to efficient and profitable digital transformation for banks?
What is a Digital Twin Technology?
a digital twin is a virtual replica of a physical system that can model, simulate, monitor, analyze, and constantly optimize the physical world. Digital twins not only help a financial institution assess how existing systems are performing; they also enable the financial institution to anticipate how these systems, products, or even people could behave in different scenarios.
At its simplest, it’s a replica of your business, a digital doppelganger, a carbon copy. Why is that useful? Because if you can model an opportunity, external risk, or internal change using a digital twin, you can harness the results to shape policy, anticipate chances for growth, or even sidestep disaster.
Digital twinning is different from predictive analytics. With predictive analytics, limited inputs and a narrow focus result in individual outcomes. But because digital twins take diverse variables into account, it’s possible to generate multiple outcomes, and to continue to manipulate them by changing variables, like you would on a spreadsheet. A digital twin can give you not just an oversight of your bank, but also unforeseen insights into it.
How does it?work?
A digital twin is an exact copy of a real-world process or product that provides critical data at each stage of the life cycle of that process or product. Generated by software, digital twin technology allows organizations to bridge the gap between the physical and virtual worlds. Real-time data is applied to a virtual model to simulate potential scenarios, use machine learning and discover possible outcomes from these scenarios.
This sharing of information between physical products or processes and digital models builds a closed feedback loop fed by compounding information: The real-world process sends data, the digital twin evaluates and provides feedback, the analysis is tested, the process is improved and the cycle begins all over again. This creates a virtuous circle of continuous enhancement driven by data that is constantly being expanded and refined.
A digital twin example in banking could take the form of optimizing a business continuity plan or compliance process; analyzing customer behavior; or planning out the design, location, and construction of a new branch.
Using information gathered from the digital twin process can accelerate product development, improve operational efficiency, meet sustainability goals, and improve customer experiences in a way that minimizes risk and cost.
Digital twin applications for?banks
Digital twins could help banks in three key areas
1. Increased profitability and growth
As online options grow in number, traditional banks are often up against tools and platforms that are faster, cheaper, and easier for consumers to use. To avoid the commoditization of the products and services they provide, many banks have placed an emphasis on personalization and high-touch service.
Digital twins of customers are already occurring in a way, as consumers continue to live their lives online through social media. Combined with bank data, a financial institution can paint a fairly full picture of customer behavior and needs. By collating that information into a model, banks could beat a faster path to profitability. They can quickly bring to market new products and services, using the digital twin to tailor the offering, test out messaging and deliver to the right channels.
2. Sustainability goals
ESG (environmental, social, and governance) frameworks are hot topics, but actually instituting processes to meet ESG goals is another matter. Digital twinning offers a way to assess the potential for sustainability, providing banks with a tool to make informed decisions and evaluate environmental impact. For example, a digital twin could generate comparative data to help plan out branch locations. It could help banks measure the environmental impacts and associated costs of building a new branch, versus repurposing and retrofitting an existing building.
3. Operational efficiency
Good resource management is a constant organizational goal for any business, and current and impending economic conditions are making it more important than ever for banks to do more with less.
Creating a digital twin to mirror complex processes can provide valuable data that could supercharge the risk management process for banks, generating information to create efficiencies in the following areas: