Application Research of Vertical Federated Learning Technology in Banking Risk Control Model Strategy

• Published in: 2023 IEEE Intl Conf on Parallel & Distributed Processing with Applications, Big Data & Cloud Computing, Sustainable Computing & Communications, Social Computing & Networking (ISPA/BDCloud/SocialCom/SustainCom) pp. 545 - 552
• Main Authors: Luo, Yong, Lu, Zhi, Yin, Xiaofei, Lu, Songfeng, Weng, Yiting
• Format: Conference Proceeding
• Language: English
• Published: IEEE 21.12.2023
• Subjects: Bank Risk Management; Computational modeling; Credit Diversion; Data models; Data protection; Federated learning; Homomorphic Encryption; Internet; Online banking; Privacy-Preserving Computation; Technological innovation; Vertical Federated Learning
• DOI: 10.1109/ISPA-BDCloud-SocialCom-SustainCom59178.2023.00103

This study centers on the application of vertical federated learning technology in the context of Internet banking loans, with a particular focus on innovations in data privacy protection, risk control model algorithms, and secure multi-party computation. Currently, banking risk control strategies mainly rely on traditional data processing technologies, which often fall short in protecting user privacy and ensuring data usage efficiency. We adopt vertical federated learning technology, offering an innovative solution for the Internet banking loan scenario. Firstly, regarding data privacy protection, we propose a differential privacy mechanism to safeguard user-sensitive data. Secondly, we innovatively apply risk control model algorithms, facilitating collaborative modeling across multiple Internet loan platforms through federated learning. Furthermore, we introduce secure multi-party computation technology to ensure the secure transmission of data and confidentiality of computation processes during federated learning. Through empirical experiments on real Internet loan datasets, we validate the effectiveness and feasibility of our proposed methods. After implementing our risk control model, the credit approval rate increased from 3.44% to 18.2%, with a single-day high reaching 25.53%. The average loan amount increased by 7,700 yuan, and the average interest rate slightly declined by 0.48%, marking a significant improvement and breakthrough compared to traditional risk control models. This study offers innovative solutions for data privacy protection and risk control in the Internet loan scenario, providing safer and more reliable services for financial institutions and users. Moreover, our methods possess high practicality and promotional value. The potential widespread impact on the industry is profound.