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Explainable AI in Fintech Risk Management.

Niklas Bussmann^1,2, Paolo Giudici³, Dimitri Marinelli¹

¹FIRAMIS, Frankfurt, Germany.

Frontiers in Artificial Intelligence

|March 18, 2021

Summary

This summary is machine-generated.

This study introduces an explainable AI model for fintech risk management, using Shapley values to interpret credit risk in peer-to-peer lending. It identifies financial characteristics that predict borrower behavior for better risk assessment.

Keywords:

credit risk management explainable AI financial technologies logistic regression peer to peer lending predictive models

Related Experiment Videos

Area of Science:

Fintech
Artificial Intelligence
Risk Management

Background:

Peer-to-peer (P2P) lending platforms present unique credit risk challenges.
Traditional risk assessment models may lack transparency and interpretability.
The need for explainable AI (XAI) in financial decision-making is growing.

Purpose of the Study:

To propose an explainable AI model for fintech risk management, specifically for P2P lending.
To enhance the interpretability of AI-driven credit risk assessments.
To identify key financial characteristics influencing creditworthiness in P2P lending.

Main Methods:

Development of an explainable AI model utilizing Shapley values.
Application of the model to a dataset of 15,000 small and medium companies seeking P2P credit.
Analysis of financial characteristics to understand credit score determinants.

Main Results:

The explainable AI model effectively interprets credit risk predictions based on explanatory financial variables.
Risky and non-risky borrowers were successfully grouped by shared financial characteristics.
Identified financial traits provide insights into credit scores and future borrower behavior.

Conclusions:

Explainable AI, particularly using Shapley values, offers a transparent approach to P2P lending risk assessment.
Understanding borrower financial characteristics is crucial for accurate credit scoring and behavior prediction.
The proposed model can improve risk management strategies in the fintech sector.