Analysis of Vertical Federated Technology for Effective Financing of Small and Medium-Sized Enterprises Based on Three-Party Evolutionary Game

Introduction

The development of small and medium-sized enterprises (SMEs) depends upon financial support (Dou et al., 2024; Lu et al., 2020), which is crucial for the growth of enterprises. SMEs typically require a significant amount of funds for development activities. Once product development is completed, SMEs need funds to carry out marketing, establish sales channels, and expand production scale. In such processes, SMEs often encounter cash flow fluctuations (Lu et al., 2021). But the activities of SMEs are often accompanied by high risks and uncertainties; therefore, financial institutions might not be willing to provide them enough financial support. With the development of information technology, especially the advancement of big data technology (Song et al., 2021), the data of SMEs are currently known as the basis and references which can promote effective financing by implementing advanced financing methods, such as credit loans, accounts receivable financing, and so forth.

The mode of supply chain financing (SCF) is a useful way to promote financial support to SMEs based on information technology. SCF uses upstream and downstream business data and financial institutions can effectively reduce risks based on SCF(Wahdan & Emam, 2017). However, it must be pointed out that the heterogeneity of business scenarios, non-standard data formats, and widespread information silos make it difficult for financial institutions to effectively perceive effective information. Relying solely on the business data of SMEs does not fully gain the trust of financial institutions. Financial institutions may be concerned about the authenticity of enterprise data and about the potential risks of lending to SMEs that do not have outstanding credit. This leads to less lending or no lending. In fact, in the supply chain system, these important business data are mainly concentrated among the core enterprises that provide order to SMEs. According to existing research results, core enterprises are often more likely to gain the trust of financial institutions and obtain funding requirements that meet their own needs (Gelsomino et al., 2022). By using core enterprises as partners for SMEs, and through the effective trust role of core enterprises, SMEs' financing needs will inevitably be met considerably. Relying on the credit of core enterprises in the industrial chain can provide financing information services for upstream and downstream enterprises, but the willingness of core enterprises to share business data may not be strong. The reality is that the core enterprises are unwilling to share information for relevant stakeholders to obtain or know due to problems of operational security and privacy disclosure. Sensitive information related to corporate finance, transaction records, and customer data, once leaked, may result in economic losses and reputational damage. Each country has strict legal requirements for data protection, and companies must comply to avoid legal risks. So the cooperation of the two parties becomes a challenge in the financing process. Effective privacy protection can reduce the risk of fraud caused by data breaches and prevent data tampering or loss; data cooperation based on privacy protection may be an effective way to solve this problem.