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Abstract. Open banking enables individual customers to own their banking data, which provides fundamental support for the boosting of a new ecosystem of data marketplaces and financial services. In the near future, it is foreseeable to have decentralized data ownership in the finance sector using federated learning. This is a just-in-time technology that can learn intelligent models in a decentralized training manner. The most attractive aspect of federated learning is its ability to decompose model training into a centralized server and distributed nodes without collecting private data. This kind of decomposed learning framework has great potential to protect users’ privacy and sensitive data. Therefore, federated learning combines naturally with an open banking data marketplaces. This chapter will discuss the possible challenges for applying federated learning in the context of open banking, and the corresponding solutions have been explored as well. Keywords: Federated learning · Heterogeneous federated learning Few-shot federated learning · One-class federated learning · Open banking · Data marketplace

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Introduction

As a subspecies to the open innovation [7,8] concept, open banking is an emerging trend in turning banks into financial service platforms, namely banking as a service. From a financial technology perspective, open banking refers to: [14] 1) the use of open application programming interfaces (APIs) that enable thirdparty developers to build applications and services around the financial institution, 2) greater financial transparency options for account holders ranging from open data to private data, and 3) the use of open-source technology to achieve the above. [6] Open banking can be naturally evolved into a new ecosystem of data marketplaces where participants can buy and sell data. As stated by McKinsey & Company [6], open banking could bring benefits to banks in various ways, including better customer experience, increased revenue streams, and a sustainable service model for under-served markets. Open banking will form a new ecosystem for financial services by sharing banking data across organizations and providing new services. However, there are inherent risks in sharing banking data, which is sensitive, privacy-concerned, and valuable. It is c Springer Nature Switzerland AG 2020  Q. Yang et al. (Eds.): Federated Learning, LNAI 12500, pp. 240–254, 2020. https://doi.org/10.1007/978-3-030-63076-8_17

Federated Learning for Open Banking

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critical to developing processes and governance underpinning the technical connections. Moreover, the European Union’s General Data Protection Regulation (GDPR) [12] enforces organizations to pay great attention when sharing and using customers’ data. In the new financial ecosystem, a number of small and medium-sized enterprises will provide novel applications using artificial intelligence (AI) technology. Intelligent applications are already driving a dramatic shift in how financial institutions attract and retain active customers. In recent times AI has become

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