How To Implement A Digital Financial Twin?

What is Digital Financial Twin?

Digital Financial twin is one the most trending topics in the fintech domain to be discussed about.

For a long time, banks and financial institutions have tried to understand what their clients need and how they utilize data. They create models to help with this, but even the best models can’t fully capture the complexity of people’s financial lives because they lack detail and context.

Now, the idea of Digital Twins 2.0 is being introduced. These are virtual copies of customers that use advanced Generative AI to learn and improve. In simple terms, it’s like having a digital twin or exact copy of your business.

Digital twins can really help banks change and improve by creating a digital version of their physical assets, processes, and systems. This can help banks run better and make their customers happier. For example, a bank can use a digital twin of a branch to test different setups or staff levels, helping them find the best way to handle changes in customer visits or new services. This could make their branches more efficient.

Digital twins can also help banks predict and track how their assets, like ATMs or loans, are doing. This way, banks can fix problems before they happen, which makes their services more reliable and keeps customers happy. Additionally, banks can use digital twins to simulate how customers interact with their services. This helps them understand what customers like and need, allowing them to create better, more personalized products.

Read: Impact of Fintech on Retail Banking Trends

Key Features

Real-Time Data: It constantly updates with the latest financial information.
Simulations and Forecasts: It can run simulations to forecast future financial scenarios based on different variables.
Personalization: Tailors insights and recommendations to individual financial goals and risk profiles.
Integration: Connects with various financial accounts, including bank accounts, investment portfolios, and even debts.

Types of Digital Twins

Twin Components
Digital models of individual components or elements, including motors, sensors, switches, and valves, are referred to as component twins. They offer comprehensive data regarding a component’s performance and behavior, both in real-time and over time. This enables organizations to monitor the health and performance of these components and implement the requisite modifications as required.

The Asset Twins

Digital models of tangible assets, including buildings, machines, and vehicles, are referred to as asset twins. They furnish real-time data regarding the operational status, performance data, and environmental conditions of an asset. This assists organizations in enhancing the efficacy of their operations and reducing downtime.

System Twins
Digital models of entire systems or processes are known as system duplicates. They enable organizations to monitor and analyze the performance of a system and pinpoint areas where enhancements can be implemented. Organizations can enhance their operations and optimize their processes through the use of system siblings.

Twins of Process
Digital replicas of entire business processes or consumer journeys are known as process twins. They furnish comprehensive data regarding the manner in which consumers interact with an organization’s products and services in real time. This assists organizations in identifying areas where the consumer experience can be enhanced.

Read: The Top 10 AI Books Every Business Leader Should Read in 2024

Why Use a Digital Financial Twin?

1. Enhanced Decision-Making

Having a clear view of your financial health allows for better decision-making. Whether it’s choosing an investment, planning for retirement, or managing daily expenses, a Digital Financial Twin provides the insights needed to make informed choices.

2. Improved Financial Planning

With a Digital Financial Twin, you can create a roadmap for your financial future. It allows for scenario planning—seeing how changes in income, expenses, or investments affect your financial health.

3. Increased Efficiency

Automating financial tracking and reporting reduces manual effort and helps identify areas of improvement quickly. This efficiency can lead to better resource allocation and cost savings.

4. Risk Management

Understanding your financial risks is crucial. A Digital Financial Twin can model different risk scenarios, helping you prepare for unexpected financial challenges.

5. Personalized Financial Insights

Everyone’s financial situation is unique. A Digital Financial Twin adapts to your personal goals, providing tailored advice that aligns with your life circumstances.

How to Implement a Digital Financial Twin?

Implementing a Digital Financial Twin can seem daunting, but it can be broken down into manageable steps. Here’s a straightforward guide to getting started.

Step 1: Define Your Goals

Setting clear goals will guide the entire process.

Step 2: Gather Financial Data

Collect all relevant financial information.

Income Sources: Salaries, business income, investments, etc.
Expenses: Monthly bills, subscriptions, and discretionary spending.
Assets: Real estate, stocks, bonds, and other investments.
Liabilities: Loans, credit card debts, and other obligations.

Step 3: Choose the Right Tools

Select software or platforms that can help create your Digital Financial Twin.

Integration Capabilities: Can it connect to your bank and investment accounts?
User-Friendly Interface: Is it easy to navigate and understand?
Customization Options: Can you tailor it to your specific financial situation?

Step 4: Integrate Financial Accounts

Link your bank accounts, investment accounts, and any other financial resources to your chosen platform. This integration is vital for obtaining real-time data, which is the backbone of your Digital Financial Twin.

Step 5: Create Financial Models

Start building your financial models.

Inputting Data: Enter your gathered financial data into the platform.
Running Scenarios: Use the simulation features to see how changes (like salary increases or unexpected expenses) impact your financial future.

Step 6: Analyze Results

After running simulations, analyze the results. Look for trends, potential issues, and opportunities for growth. The insights gained here are crucial for informed decision-making.

Step 7: Set Up Alerts and Monitoring

Establish alerts for important financial events or thresholds. For example, you could set notifications for when your expenses exceed a certain amount or when investment values fluctuate significantly.

Step 8: Regularly Update Your Data

To ensure accuracy, regularly update your financial data. Set a schedule (e.g., weekly or monthly) to review and adjust your Digital Financial Twin. This will keep it aligned with your current financial situation.

Step 9: Review and Adjust Financial Goals

As life changes, so should your financial goals. Periodically review your objectives and adjust them based on your current circumstances. Your Digital Financial Twin should evolve with you.

Step 10: Seek Professional Advice

If you’re unsure about any aspect of your financial planning, consider consulting a financial advisor. They can provide personalized insights and help you leverage your Digital Financial Twin effectively.

Establishing the Foundation with SAP Solutions

SAP is a market leader in enterprise software, transforming businesses into sustainable, intelligent enterprises. Our applications and services facilitate the continuous adaptation and profitable operation of business and public clients in 25 industries worldwide. SAP enhances the quality of life and facilitates the smooth operation of the world through its global network of employees, partners, and customers.

SAP S/4HANA Cloud offers a comprehensive, intelligent ERP solution that operates on the SAP HANA in-memory database and can function as the foundation for the digital financial counterpart. They provide RISE with SAP, a comprehensive solution that includes SAP S/4HANA Cloud, SAP Business Technology Platform, analytics, and business process intelligence with SAP Signavio and SAP Business Process Intelligence.

Quadrant Knowledge Solutions published its 2023 SPARK Matrix™ Report for Digital Twin of an Organization (DTO) Solution, naming SAP Signavio as Leader in this market with the highest rating for Technology Excellence.

Digital twins are not a novel concept; however, as the world becomes increasingly interconnected and unpredictable, an increasing number of organizations are beginning to accelerate and scale the evolution of their operations and processes. Additionally, these digital doppelgangers are becoming increasingly robust, offering more comprehensive feedback and insights, as analytics, modeling, and simulation tools have become more advanced.

In order to achieve a balance between the inside-out and outside-in perspectives of the business, the report states that the initial stage in the development of a DTO is to “map an accurate and comprehensive virtual representation of the organization’s processes.” These criteria are consistent with their vision of assisting companies in achieving complete end-to-end process observability.

SAP Signavio is capable of meeting the diverse needs of customers across industry verticals due to its comprehensive capabilities, compelling customer references, comprehensive road map and vision, and product suite with high scalability.
The SPARK Matrix™ from Quadrant Knowledge Solutions comprises a comprehensive examination of the global market dynamics, key trends, and the vendor landscape, in addition to an assessment of 19 prominent DTO vendors. Each market participant is evaluated against a variety of criteria, including Customer Impact and Technology Excellence.

How Does Digital Financial Twin Addresses Challenges?

Control information that is detailed down to the individual product level
Transparency regarding the value contributions made throughout the duration of the product or customer’s lifecycle
The integration of traditional financial metrics with nonfinancial information
Access to information in a manner that is nearly instantaneous

Wrapping Up

In order to succeed in the intricate environment of today, organizations must leverage substantial quantities of data to inform their decision-making processes. It will be essential to automate the management of this data in order to completely realize its value. A digital financial twin facilitates efficient automated management by facilitating consistent attribution, rapid data flow without information loss, and the use of powerful cloud-based applications, such as dashboards for real-time simulations of intricate scenarios. Finance functions can assist their organizations in achieving a significant competitive advantage by utilizing a digital counterpart to expedite decision-making and improve visibility into ESG impacts and value contributions.

Read: Fintech Marketing: Top 10 Power Strategies to Accelerate Growth

Thanks for reading!