iPhone | iPad
Android
Huawei
UAE consumers get their hands on the world's thinnest and lightest AI foldable smartphone — the HONOR Magic V3, and the new HONOR MagicPad 2 on the very same day as its global debut
KT APPDOWNLOAD
Catalysing a New Era of Financial Prowess
How Digital Twin Technology is driving economic growth and will make the UAE a financial powerhouse
Digital twins concept. A finger touches and connects with digital finger to activate both the physical and digital worlds with a single push. Business and technology simulation modeling
In the ever-evolving landscape of global finance, digital twin technology stands out as a transformative force. This advanced technology, which creates virtual replicas of physical assets and systems, is significantly enhancing the UAE's economic landscape, making it a burgeoning financial hub. As Mohammed Shaheen, Founder and Director of Seven Capitals DIFC, asserts: "Digital twin technology is not just about innovation — it's about revolutionising how we approach and manage financial systems."
Data Bridge Market Research analyzes that the global digital twin financial services and insurance market is expected to reach $16,341.97 million by 2031, from $4,882.77 million in 2023, and is expected to undergo a CAGR of 16.3 per cent during the forecast period of 2024 to 2031.
Enhancing Financial Forecasting and Risk Management
Digital twin technology profoundly impacts financial forecasting and risk management in the UAE’s financial sector. By integrating historical data with real-time information, digital twins provide accurate simulations of financial systems and market conditions. This capability allows institutions to visualize potential future scenarios with high precision.
"With digital twins, we can simulate various market conditions and stress scenarios, offering a clearer picture of potential risks and opportunities," explains Shaheen.
Delving deeper, Shaheen provides an example and states: "For instance, financial institutions can use digital twins to model the effects of global economic shifts on local markets. This proactive approach helps in refining forecasting models, making them more reliable and aligned with current market dynamics. By continuously updating these models with real-time data, digital twins ensure that forecasts remain relevant and accurate, allowing for more informed decision-making."
He further asserts: "According to recent studies, firms leveraging digital twin technology see up to 25 per cent improvement in asset management efficiency and a 20 per cent increase in investment returns. This illustrates the technology’s potential to drive better decision-making and enhance financial performance in the UAE’s competitive market."
Optimising Asset Management and Investment Strategies
Digital twins are also playing a crucial role in optimising asset management and investment strategies within the UAE’s financial markets. By creating virtual models of assets and market conditions, these technologies allow financial institutions to evaluate various investment scenarios with greater precision. Shaheen highlights: "Digital twins enable us to model the impact of market fluctuations on different asset classes, such as real estate and equities, helping us make more informed investment decisions."
Market research by McKinsey highlights that firms using digital twin technology have improved their regulatory reporting accuracy by up to 30 per cent.
"In the UAE, where real estate investments are a significant component of the financial landscape, digital twins can simulate property market trends and predict future value changes. This capability allows asset managers to adjust their strategies dynamically in response to shifting market conditions. Additionally, digital twins facilitate scenario analysis and stress testing, helping firms anticipate the impacts of sudden regulatory changes or economic events, thus optimising their investment strategies," adds Shaheen.
Improving Regulatory Compliance and Transparency
Another significant advantage of digital twin technology is its impact on regulatory compliance and transparency. Digital twins can model complex regulatory scenarios and provide real-time monitoring of financial operations. This approach enhances institutions' ability to adapt to new regulations and ensure compliance, reducing the risk of breaches.
As Shaheen notes: "Digital twins offer a proactive approach to regulation, enabling us to stay ahead of compliance requirements and maintain transparency."
He further elaborates: "Digital twins also improve transparency by offering a clear and verifiable view of financial operations and transactions. This enhanced visibility helps reduce the risk of fraud and build greater trust among stakeholders. By integrating digital twins into compliance systems, firms can achieve more accurate regulatory reporting and increased auditability, aligning financial activities with regulatory standards."
Revolutionising Customer Experience
Digital twin technology is set to revolutionize customer experiences and personalised financial services in the UAE. By creating detailed simulations of individual customer profiles, digital twins enable financial institutions to offer highly tailored financial solutions. "With digital twins, we can model a customer's financial habits and preferences, allowing for personalised product recommendations and proactive advice," clarifies Shaheen.
A recent study by Grand View Research suggests that the revenue for markets from digital twin initiatives could reach $26 billion by 2025. A digital twin isn’t merely helpful for upselling, it can be a driver of innovation by pointing to the direction a company should take to make improvements for that twin, and in turn for the customer it represents. "For example, banks can use digital twins to analyse a customer's spending patterns and investment goals, providing customised financial advice and solutions. This personalised approach leads to improved customer satisfaction and engagement, as financial services are more closely aligned with individual needs and preferences," he explains.
Despite its benefits, implementing digital twin technology in the UAE’s financial sector comes with challenges. Data privacy and security are major concerns, given the sensitive nature of financial data. Ensuring robust cybersecurity measures and compliance with regulations like the UAE Data Protection Law is essential. Additionally, the high cost of technology and integration can be a barrier. To mitigate this, firms can consider phased implementation and cloud-based solutions to manage expenses.
Data quality and interoperability are also critical issues. Financial institutions must establish strong data governance practices to ensure the accuracy and compatibility of data used in digital twins. By addressing these challenges with strategic solutions, we can fully harness the potential of digital twin technology.
Impact on Smart Cities, Growth
Digital twin technology is set to play a pivotal role in the development of smart cities in the UAE, influencing economic growth through enhanced financial services. By creating detailed virtual models of urban environments, digital twins facilitate efficient city management and infrastructure optimisation. This efficiency, in turn, enhances the financial sector’s ability to provide targeted investment strategies and financial solutions.
"As smart cities evolve, digital twins will streamline urban planning, reduce operational costs, and improve service delivery. This will not only drive economic growth but also attract further investments, solidifying the UAE’s position as a global financial leader. Digital twins are transforming our approach to urban and financial planning, fueling economic growth, and positioning the UAE at the forefront of innovation," concludes Shaheen.
In essence, digital twin technology is a catalyst for economic advancement in the UAE, enhancing financial forecasting, optimizing asset management, improving regulatory compliance, and revolutionising customer experiences. As the UAE continues to embrace this transformative technology, its status as a financial powerhouse is set to grow even stronger.
— anam@khaleejtimes.com
More news from Business Technology Review
The iPhone 16 series is shaping up to be a game-changer, promising a range of new upgrades for users
Major gold retailers see good sales during the upcoming festive season on rising consumer confidence and renewed love for fine jewellery
With the rise of digital financing and the shift away from traditional credit cards, BNPL presents a compelling alternative that aligns with the needs and preferences of modern consumers
Explore how Japan's visionary avatars bridge the gap between humans and robots, as Professor Hiroshi Ishiguro defines a future where technology will enhance human experience
Satish Sanpal, Chairman of ANAX Holding, is a strong advocate for philanthropic causes, sustainable entrepreneurship, and the development of future leaders
Mastercard's transformative technology is enabling businesses to thrive in a digital-first world
The consultancy simplifies company formation in Dubai, helping entrepreneurs and established businesses through the complexities of the UAE’s business landscape