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An Automated Machine Learning Framework for Interpretable Customer Segmentation in Financial Services

Author

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  • Iveta Grigorova

    (Faculty of Automatics, Industrial Automation, Technical University of Sofia, 1000 Sofia, Bulgaria)

  • Aleksandar Efremov

    (Faculty of Automatics, Industrial Automation, Technical University of Sofia, 1000 Sofia, Bulgaria)

  • Aleksandar Karamfilov

    (Faculty of German Education in Engineering and Business Administration, Technical University of Sofia, 1000 Sofia, Bulgaria)

Abstract

Customer segmentation is essential in financial services for designing targeted interventions, managing dormant portfolios, and supporting marketing re-engagement strategies. Traditional approaches such as Recency–Frequency–Monetary (RFM) analysis offer interpretability but often lack the flexibility needed to capture heterogeneous behavioral patterns. This study presents an automated segmentation framework that integrates machine learning-based clustering with RFM-based interpretability benchmarks. KMeans and Hierarchical clustering are evaluated across multiple values of k using internal validity metrics (Silhouette Coefficient, Davies–Bouldin Index) and interpretability alignment measures (Adjusted Rand Index, Normalized Mutual Information, Homogeneity, Completeness, and V-Measure). The Hungarian algorithm is used to align machine-learned clusters with RFM segments for comparability. The framework reveals behavioral subgroups not captured by RFM alone, demonstrating that machine learning can expose hidden heterogeneity within dormant customer populations. While outcome-based financial validation is not yet feasible due to the cold-start nature of the deployment environment, the study provides a reproducible, scalable pipeline for segmentation that balances analytical rigor with business interpretability. The findings highlight how data-driven clustering can refine traditional segmentation logic, supporting more nuanced portfolio monitoring and re-engagement strategies in financial services.

Suggested Citation

  • Iveta Grigorova & Aleksandar Efremov & Aleksandar Karamfilov, 2025. "An Automated Machine Learning Framework for Interpretable Customer Segmentation in Financial Services," IJFS, MDPI, vol. 13(4), pages 1-21, December.
  • Handle: RePEc:gam:jijfss:v:13:y:2025:i:4:p:243-:d:1819607
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