Everyone is well acquainted with the concept of digital twins in “physical space”. We believe the time has come to think about digital twins in “virtual” space. At Dassault Systèmes, we call them Virtual Twins.
Virtual Twins in Financial Services?
Digital twins are remaking the world of manufacturing, aerospace and defense in general. Dassault Systèmes has customers using our 3DExperience platform, to make a comprehensive, virtual replica of their products: cars, packaging, aircraft. At Dassault Systèmes, we call these “Virtual Twins” and they are driving tremendous operational efficiencies and regulatory compliance across multiple industries.
Modeling in the virtual world enables aerospace and defense firms to optimize designs before building them in the physical world. All aspects of the end product, from aerodynamics to electronics and every bolt and rivet in between, are replicated in the virtual twin. These virtual replicas can be continuously enriched based on real time production and supply chain data; helping firms anticipate issues, and adjust the model to optimize processes.
The virtual twin runs in parallel with the production environment and is updated with real-time reporting on KPIs for every operation in the aircraft’s complex systems. Having the virtual twin enables the designers, manufacturers and suppliers to assess and test specific designs or changes before the aircraft is made. The virtual twin also helps optimize parts and material supplies over the entire value network. – and even after the aircraft reaches the end of its lifecycle, though virtual tracking & oversight of the disassembly processes for all components and materials
Some say these “virtual twin experiences” could only apply to physical products like planes, cars and packaging. We think that is short sighted. We believe virtual twins can be just as revolutionary for financial services. In fact, we argue that given the complexity of financial service operational ecosystems and the increasingly onerous regulatory environment, virtual twins are becoming essential for large financial service organizations.
Do you know what you have and how it works?
Seems like a pretty simple question for a CTO or any senior manager within IT in a bank or insurance company. But when you think about the complexity of large financial services organizations – built through multiple acquisitions, spanning multiple businesses across different geographies, various regulatory regimes, encompassing an array of diverse applications, data feeds, and interactions with third party interfaces – you realize that no one can really understand everything they have and how it works without substantial assistance.
You need more than a static flow chart.
You need a full blown model of how everything fits together—like the components of an airplane, you need to know what each part does, where it comes from, what it connects to and how it fits into the larger picture. Like an airplane, you need to be able to test and simulate changes before you implement them.
You need a comprehensive model that can capture complex systems of systems.
You need a robust methodology to describe what everything is and how it works in a consistent way across the organization.
In Engineering speak, you need Model Based Systems Engineering (MBSE) to ensure digital continuity and optimize operational efficiency.
The Virtual Twin of a bank
Imagine what you could do with an accurate, comprehensive virtual twin of your operational ecosystem. Not just a flow chart. A twin that is fully connected, end-to-end. No silos, no breaks. A twin where you can digitally track and monitor each operation, what it depends on and what it delivers downstream to the broader ecosystem. Think of it as a completely accurate Development or “Dev” environment. One that precisely mimics your Production or “Prod” environment. Financial Service companies can leverage a virtual twin to improve the production environment making it more robust and efficient.
Recent digital payment outages in US banks provide a perfect example of where a virtual twin could have eliminated several days of a service being down, the reputational damage around that and the regulatory scrutiny that it has brought.
One bank in the U.S. experienced digital payment outages for a few days in January (2023) and another bank experienced something similar with the same digital payment provider at the end of July. Customers were unable to use the digital payment app to pay their bills. After several days, the issue was identified and resolved—but that was after a lot of social media posts, negative press and frustrated and lost customers.
We believe a virtual twin could have helped both banks avoid the outages and the reputational risk they created. With a virtual twin modeling exactly how each system and interface works and what each process depends on and feeds downstream, these banks could have tested any change, patch, upgrade or reconfiguration in the virtual twin before it was implemented in the production systems. Leveraging the same methodologies as the aerospace and defense sector, these banks could have “seen” the potential for an outage and prevented it before it inconvenienced hundreds of customers.
Test changes BEFORE you implement them
Virtual twins help eliminate down time, streamline upgrades, system integrations and patches. With a virtual twin, banks can test any change, patch or upgrade to identify any potential service interruptions before putting them into production. With an accurate virtual twin, organizations do not have to wait for a weekend to install urgent updates and patches, because they have already tested them and know they are going to work as intended.
A virtual twin assists in cyber security too. Virtual twins provide traceability across the entire ecosystem so firms can simulate breaches to any aspect of the ecosystem to predict and prevent the impacts of cyberattacks. By using the virtual twin to see vulnerabilities and dependencies, financial service organizations can test likely targets for attacks and implement processes and changes to mitigate those risks.
Help eliminate surprises in Mergers & Acquisitions
Financial Service firms can also reduce operational and reputational risks associated with mergers and acquisitions using virtual twins of their operations. A virtual twin can be used to assess the operational risks and complexities of business mergers and acquisitions. Integration managers can use the virtual twin to see and address overlaps and gaps within the combined operations; enabling them to realize operational efficiencies on day 1. Virtual twins can also streamline the addition of new business channels by providing visibility around the required people, processes and data in the new venture.
Virtual Twins: The time is now
Virtual twins are not just for physical products. They can be used to model any complex system within financial services organizations. They are powerful tools for engagement; imagine being able to “show” your board or senior management what happens in a cyber-attack or some other disruption scenario. A virtual twin is intuitive and accessible to any business user; no engineering degree is required. Business owners could access the twin to trace relationships and dependencies and instantly understand how their particular business works, and what it depends on.
The financial company of the future is the one that understands the power of a virtual twin and leverages that power to reduce risk, stay ahead of the competition and be compliant with new regulations.
Stay tuned for the second blog in this series for more on how banks & insurers can use virtual twins to meet the regulatory obligations around DORA and Operational Resilience.
Taherah KUHL, Vice President Business Services Industry, Dassault Systèmes
Taherah has worked at Dassault Systèmes for the past 7 years. Focused on the Financial Services & Logistics industries globally, Taherah is responsible for driving the industry. LinkedIn profile
Vice President Business Services Industry, Dassault Systèmes