Legacy systems have long been a cornerstone of the financial services industry, providing the backbone for essential operations and ensuring stability and efficiency across banking institutions. However, as technological advancements accelerate, these systems are showing their limitations. According to a report by NTT DATA, 80% of organisations agree that outdated technology hinders progress and innovation, with 94% of C-suite executives believing it greatly affects business agility.
In banking, where precision and real-time data are paramount, a system that can’t keep pace with market demands poses a significant risk. Next-generation technologies, like digital twins, could offer a promising pathway to help optimise banking operations as we move towards more interconnected and real-time solutions.
How do digital twins elevate banking systems?
A digital twin is a virtual model that replicates a system's physical and operational elements, enabling continuous real-time monitoring and optimisation. By integrating AI, machine learning (ML), and Internet of Things (IoT) capabilities, digital twins can simulate processes, test scenarios and gather deep insights, without disrupting ongoing workflows.
Most prevalent in the real-world environment, such as civil engineering and physical asset maintenance, they are part of the emerging metaverse and are gaining traction in many other industries. A digital financial twin in the automotive industry, for instance, can analyse profitability at product level, determining the value contributions of specific equipment by vehicle ID, thereby optimising decisions on product variants with full cost and investment transparency.
In the future, the lines between real and digital worlds will become more blurred, where every asset and process will have a virtual copy linked to it, and in this way, every part of work can be done digitally before it is done physically.
Let’s explore how digital twins could help transform the banking sector.
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Real-time monitoring and optimisation
Real-time data is a game changer in banking, offering a competitive edge through instant insights and faster decision-making. Digital twins can enable banks to continuously monitor their operations with a 360-degree view of internal systems, from customer service touchpoints to transaction flows. Banks can then use this real-time feedback to swiftly identify bottlenecks or inefficiencies.
Digital twins can allow banks to simulate different service outcomes and improve customer satisfaction by reducing downtime. Banks can then predict customer needs, reduce waiting times and prevent service interruptions – addressing issues before they escalate. As customer expectations continue to rise, a digital twin can help banks hone and refine the user experience.
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Predictive maintenance and risk management
Downtime can be catastrophic in banking, leading to millions in lost revenue, diminished customer trust and the potential for regulatory breaches. Digital twins can enable predictive maintenance to ensure that banks can identify vulnerabilities and stay ahead of operational risks before they become crises. This could be anticipating hardware failure in ATMs or pre-empting software glitches; digital twins could allow for the move from reactive to proactive risk management.
Banks could also simulate regulatory compliance scenarios, ensuring systems are always up-to-date with the latest financial laws and regulations. For example, banks preparing for shifts like the MIFID III framework could test their systems' readiness, mitigating compliance risks and fines.
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Operational efficiency and automation
By simulating transactions and service workflows, banks could fine-tune their processes without needing to disrupt day-to-day operations and optimise these complex banking processes to make them more efficient. Digital twins could allow banks to allocate resources more effectively by automating routine tasks, freeing employees to focus on more value-driven activities.
In fact, the autonomy of digital twins allows them to manage large-scale processes and banks’ high-level tasks and introduce automation in fraud detection, regulatory reporting or cross-border transactions. This means no interruptions to ongoing systems while the digital twin focuses on handling modern demands.
The synergy between legacy systems and digital twins
We all appreciate that legacy banking systems are not going anywhere overnight. However, by the integration of digital twins you can help to ensure that legacy systems remain relevant and efficient in an increasingly digital landscape. Working alongside legacy infrastructure a digital twin can help to maintain business continuity and make the most of innovation.
As expert partners to the banking sector, we’re experienced in helping integrate new systems and solutions that take advantage of the latest technologies. Here’s how our partnership thrives:
Strategic implementation
We don’t see implementing digital twins in banking as a plug-and-play solution – it requires thoughtful planning. We do this by adopting a staged approach, ensuring that each step maximises return on investment (ROI) while minimising risks.
As an illustration:
- Level 1: Connected twin - establishes real-time data visualisation and monitoring
- Level 2: Intelligent twin - simulates and analyses capabilities to drive smarter decision-making
- Level 3: Autonomous twin - autonomous execution based on insights
- Level 4: Clustered twin - connects multiple digital twins to oversee complex banking operations.
Data foundations
Data is the lifeblood of any banking system and digital twins thrive on it. To ensure that a bank’s digital twin provides the necessary insights to improve operations, we recommend implementing a robust data strategy. From monitoring customer service satisfaction to ATM usage patterns, real-time data from digital twins informs better, quicker decision-making. This combination of accurate data with digital twin simulations results in improved operational efficiency and enhanced customer service.
Collaboration with the right partners
Banks need to collaborate with providers who understand both legacy banking systems and digital twin technology. Partners with this domain knowledge ensure smooth integration, providing expertise on how to best leverage digital twins to modernise existing infrastructure.
Educating teams for success
Introducing digital twins into a banking environment also requires change management as they bring flexibility and agility to legacy operations and new ways of thinking and operating. That’s why training teams on how to use and maximise the benefits of digital twins helps ensure that everyone is well-integrated into daily operations. Providing ongoing education will also keep teams abreast of new features, capabilities and potential benefits. Success hinges on this clear communication and the ongoing support for the teams that will use this technology.
Unlocking the future of banking with digital twins
Digital twins are not just a trend; they will become increasingly essential in the future. They offer a way to work with existing systems, improve efficiency and deliver superior customer service. Integrating this cutting-edge technology can help banks stay ahead of the curve, adapting to market changes with agility and precision.
Are you interested in learning more about modernisation? Digital twins can deliver a stepping stone to deeper modernisation. Take a look at our core modernisation hub for some great insights on our unique blend of human expertise and patented automation. Or reach out to the team if you’d like help understanding how we derisk and accelerate modernisation.