AI-Driven Credit Risk and Decision Intelligence in Digital Fintech Ecosystems A Machine Learning & Financial Analytics using ROC & Shap Algorithm

Description

The rapid expansion of digital fintech ecosystems has transformed credit provision, risk evaluation, and financial decision-making. While artificial intelligence (AI) and machine learning (ML) techniques significantly enhance predictive accuracy in credit risk assessment, their integration into decision intelligence frameworks remains fragmented and insufficiently aligned with regulatory requirements. This study proposes an AI-driven credit risk and decision intelligence framework tailored for digital fintech environments, integrating predictive modeling, explainability mechanisms, and decision-support analytics. Using a policy-realistic synthetic dataset, multiple supervised learning models are evaluated for estimating Probability of Default (PD), Loss Given Default (LGD), and Expected Loss (EL). Experimental results demonstrate that Gradient Boosting Machines achieve superior performance (Accuracy: 95%, AUC: 0.9892). Explainable AI (XAI) techniques enhance interpretability and support governance compliance. The proposed framework bridges the gap between predictive performance and actionable decision intelligence, enabling transparent, auditable, and regulator-aligned fintech operations.

Steps to reproduce

The financial services industry has undergone a profound transformation driven by digitalization, fintech innovation, and the increasing availability of large-scale data. Credit risk assessment, a fundamental component of financial decision-making, is no longer confined to traditional statistical models but is increasingly influenced by advanced computational techniques. Historically, credit risk models relied on structured financial indicators and linear statistical assumptions. While these models offered simplicity and interpretability, they were inherently limited in their ability to capture complex relationships among variables.

Institutions

• North South University

  Dhaka Division, Dhaka
• Independent University

  Dhaka Division, Dhaka

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