Feature generation for SME behavioral credit scoring model using graph embeddings

Banks lend credit regarding customers' credit scores from in-house credit risk models. Corporate customers hold greater risk and are evaluated with already high-performing models. In this thesis, corporate customers' financial interactions (money transfers) with each other are used to develop an additional feature set to improve the behavioral credit risk scoring model of small and medium-sized enterprises. Graph representation learning does a good job in terms of extracting the essence of such relationships and projecting them into a multidimensional space. For this purpose, a graph of enterprises is constructed where they are nodes and their sum of money transfer amount over time are edges. An inductive graph representation learning algorithm, GraphSAGE, is employed. Therefore, the graph is created with directed and weighted edges and reduced to a strongly connected graph. Then, the algorithm is run in various settings to achieve the best performance. A credit scoring pipeline using different machine learning algorithms is added to improve the current model with these new embedding features. QNB Finansbank's real banking data for 2022 is used to perform this study. After looking at the results of the computational experiments, the most important contribution came from the concatenation of multiple embeddings generated with different aggregator functions. Starting from here, a potential economic savings is calculated. Additionally, it is seen that the new architecture improves the credit scoring of nodes with either low transfer amount or number of edges the most.