ubs web 2.0 contest: recommender systems for financial institutes

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Collaborative Filtering A Driver to Enable Clients to Explore, Share Experience and Build Recommendations for Products & Services Web 2.0 UBS Contest 2009 Zurich, Switzerland Amancio Bouza

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Winning Submission "Collaborative Filtering - A Driver to Enable Clients to Explore, Share Experience and Build Recommendations for Products & Services" outlines how the modern algorithms exploiting the wisdom of crowds can be used to: - create adequate bundles of products and services - allows for dynamic and fast adoption of changes to a client's life situation - provide the means for information/content sharing among clients and between clients and advisors - facilitates interaction with information about products and services.

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Page 1: UBS Web 2.0 Contest: Recommender Systems for Financial Institutes

Collaborative FilteringA Driver to Enable Clients to Explore, Share Experience and Build Recommendations for Products & Services

Web 2.0 UBS Contest 2009Zurich, Switzerland

Amancio Bouza

Page 2: UBS Web 2.0 Contest: Recommender Systems for Financial Institutes

Web 2.0 UBS Contest 2009Dec. 2009

User model of the Web 2.0

like to share experiences and to generate feedback

like to generate content and to contribute

want to be part of something bigger

trust other users more then experts based on the Wisdom of Crowds assumption

are intrinsic motivated

are connected everywhere and every time

do not honor guided help of experts or systems

want do discover and explore

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Page 3: UBS Web 2.0 Contest: Recommender Systems for Financial Institutes

Web 2.0 UBS Contest 2009Dec. 2009

External Events & Motivation

Participants & Information

SystemsProducts &

Services

Challenges Advisor

is not aware of what client worries and about the clients needs, changes in client’s life situation

recommends products & services based on limited information, i.e. client information / client portfolio

Client

is challenged with domain vocabulary, financial news, global events and has generally no domain knowledge

does not trust advisor, but other clients (Principal Agents Theory)

depends totally on advisor

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Banc products

Banc servicesNews

Financial Market Data

Client Information

Banc marketing

Advisor

Client

...

Private events

...

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‣Challenges

‣no creation of adequate bundle of products & services for clients

‣Latency in adoption to changes in client’s life situation

‣No explicit/implicit or consolidated experience sharing among clients

‣No interaction with available information and products & services

Page 4: UBS Web 2.0 Contest: Recommender Systems for Financial Institutes

Web 2.0 UBS Contest 2009Dec. 2009

Collaborative Filtering Collaborative filtering (CF)

is a modern approach to build recommender systems

is a new & trendy search paradigm: The item finds the client instead of letting the client find the item

personalizes the content and filters only relevant products

goes further then Wisdom of Crowds. CF relies on Wisdom of Community of Interests (COI).

generates more relevant recommendations then Content Filtering by considering the past actions and experiences of other clients

Two main approaches:

User-based CF: Clients who share the same preferences continue to do so in the future

Items are recommended that are preferred by clients with similar preferences, similar client portfolio or similar product & service ratings. (similar to Last.fm: “User X likes similar music, look what he also likes”)

Item-based CF: Latent semantics exists when items are combined significantly often by clients

If a client is interested in an item then other items are recommended that were combined significantly often with the current item of interest (similar to Amazon.com: “Clients that bought product X also bought product Y”)

The Web 2.0 idea of CF

User like to share ratings and experiences by giving feedback such as ratings or reviews for items

The more the users participate the more relevant recommendations can be provided by the recommender systems. Therefore, users have an interest in sharing their ratings

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Page 5: UBS Web 2.0 Contest: Recommender Systems for Financial Institutes

Web 2.0 UBS Contest 2009Dec. 2009

‣Benefits

‣creation of adequate bundle of products & services for clients

‣Dynamic and fast adoption of changes in client’s life situation

‣Information/content sharing among clients and between clients and advisors

‣interaction with available with information and products & services

External Events & Motivation

Participants & Information

SystemsProducts &

Services

Banc Marketing

Financial Market Data

News

Advisor

Recommender System

Banc services

Client

Banc products

Private events

...

...

General Approach based on Collaborative Filtering & Web 2.0

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Advisor & Client

collaborate on shared common knowledge

develop together a better bundle based on given recommendations

Advisor

supports the client with domain knowledge of an expert

helps to interpret recommendations and its consequences

gets proper understanding of what client worries and client’s need

Client

is more independent of advisor and explores possibilities based on recommendations

makes decisions based on recommendations

trusts the combination of other client’s experience and advisor’s suggestions

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Page 6: UBS Web 2.0 Contest: Recommender Systems for Financial Institutes

Web 2.0 UBS Contest 2009Dec. 2009

Architecture Recommendations are either used by the client to make the decision what to buy or as a basis for discussion with an advisor

Client’s life situation and goals can be discussed together with advisor

Financial market situation are used to validate recommendations

Advisor gains knowledge of client specific interests and what he may be interested in addition.

Similar users are computed by either applying traditional data mining techniques such as cluster algorithms or kNN approaches

Recommendation: Go for clustering because of scalability

Similar items are computed based the analysis how products & services have been combined in the past

Recommendation: Go for (incremental) Single Value Decomposition approaches because that’s the state-of-the-art in collaborative filtering

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Products & Services Client Ratings

Computation of Client Similarities

Computation of latent semantics between Products & Services

Data

Client similarityItem similarity

Presentation of Recommendations

Collaboration with Advisor

Request of new Recommendations

Consumption of Product & ServicesEvent

Implementation:1. Clustering of similar users based on ratings to get Community of Interests (COI)2. k nearest neighbor (kNN) to compute the k most similar users

Implementation:1. Single Value Decomposition (SVD)2. Association rule mining to compute3. Bayesian Networks to compute probability that two items are a

good bundle

Page 7: UBS Web 2.0 Contest: Recommender Systems for Financial Institutes

Web 2.0 UBS Contest 2009Dec. 2009

MobileInternet Face-to-Face

Interaction Landscape

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Collaboration between Client and Advisor on Microsoft’s Surface Touchtable

Our recommendations

Product APeople that have a similar portfolio also bought Product A

More recommendations

presentation on the UBS Web page

Product A

Product B

Product C

Product X buy

Product Y buy

Product Z buy

Our recommendations

Your ratings

contact advisor

Browse and rate recommendations on Smart Phones

Page 8: UBS Web 2.0 Contest: Recommender Systems for Financial Institutes

Web 2.0 UBS Contest 2009Dec. 2009

Further Benefits for the UBS

Increased client loyalty due to client’s transaction costs (lock-in)

Increased client satisfaction because of more personalized and more relevant products & services bundles. May also lead to increased client loyalty

Clients discover new interesting products & services they never considered because these have been recommended by the recommender system. Leads to new investments by the client

Increase of sales because advisors can look for new products & services that a client would be interest in. Advisor does know what a client wants before the client does

First mover advantage because a recommender system needs client feedback before performing well

Further analysis of upcoming trends based on significant shifts in item good item combinations

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Page 9: UBS Web 2.0 Contest: Recommender Systems for Financial Institutes

Web 2.0 UBS Contest 2009Dec. 2009

Management summary

Recommendations help people to explore and discover new products & services

Recommendations can support the collaboration between client and advisor

Recommendations make people independent and motivate people to buy

People trust other people and the Wisdom of Crowds

Collaborative filtering is a modern approach of building a high quality recommender system

With collaborative filtering the products & services find the right user instead of letting the user find the relevant products & services

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