From Persistent Homology to Reinforcement Learning with Applications for Retail Banking

TL;DR

This paper explores innovative methods combining persistent homology, neural networks, and reinforcement learning to enhance retail banking services, addressing data scarcity, personalized recommendations, and optimal money management strategies.

Contribution

It introduces a novel approach to generate artificial financial data, improve multi-dimensional recommendations, and apply model-free reinforcement learning for client financial management.

Findings

Artificial data generation improves recommendation accuracy.

Reinforcement learning optimizes money management policies.

Methodologies are validated on real banking datasets.

Abstract

The retail banking services are one of the pillars of the modern economic growth. However, the evolution of the client's habits in modern societies and the recent European regulations promoting more competition mean the retail banks will encounter serious challenges for the next few years, endangering their activities. They now face an impossible compromise: maximizing the satisfaction of their hyper-connected clients while avoiding any risk of default and being regulatory compliant. Therefore, advanced and novel research concepts are a serious game-changer to gain a competitive advantage. In this context, we investigate in this thesis different concepts bridging the gap between persistent homology, neural networks, recommender engines and reinforcement learning with the aim of improving the quality of the retail banking services. Our contribution is threefold. First, we highlight how to overcome insufficient financial data by generating artificial data using generative models and persistent homology. Then, we present how to perform accurate financial recommendations in multi-dimensions. Finally, we underline a reinforcement learning model-free approach to determine the optimal policy of money management based on the aggregated financial transactions of the clients. Our experimental data sets, extracted from well-known institutions where the privacy and the confidentiality of the clients were not put at risk, support our contributions. In this work, we provide the motivations of our retail banking research project, describe the theory employed to improve the financial services quality and evaluate quantitatively and qualitatively our methodologies for each of the proposed research scenarios.