Multiple perspectives HMM-based feature engineering for credit card fraud detection

Machine learning and data mining techniques have been used extensively in order to detect credit card frauds. However, most studies consider credit card transactions as isolated events and not as a sequence of transactions. In this article, we model a sequence of credit card transactions from three different perspectives, namely (i) does the sequence contain a Fraud? (ii) Is the sequence obtained by fixing the card-holder or the payment terminal? (iii) Is it a sequence of spent amount or of elapsed time between the current and previous transactions? Combinations of the three binary perspectives give eight sets of sequences from the (training) set of transactions. Each one of these sets is modelled with a Hidden Markov Model (HMM). Each HMM associates a likelihood to a transaction given its sequence of previous transactions. These likelihoods are used as additional features in a Random Forest classifier for fraud detection. This multiple perspectives HMM-based approach enables an automatic feature engineering in order to model the sequential properties of the dataset with respect to the classification task. This strategy allows for a 15% increase in the precision-recall AUC compared to the state of the art feature engineering strategy for credit card fraud detection.Comment: Presented as a poster in the conference SAC 2019: 34th ACM/SIGAPP Symposium on Applied Computing in April 201

Using hidden Markov models in credit card transaction fraud detection

In this paper we shall propose a credit card transaction fraud detection framework which uses Hidden Markov Models, a well established technology that has not as yet been tested in this area and through which we aim to address the limitations posed by currently used technologies. Hidden Markov Models have for many years been effectively implemented in other similar areas. The flexibility offered by these models together with the similarity in concepts between Automatic Speech Recognition and credit card fraud detection has instigated the idea of testing the usefulness of these models in our area of research. The study performed in this project investigated the utilisation of Hidden Markov Models by means of proposing a number of different frameworks, which frameworks are supported through the use of clustering and profiling mechanisms. The profiling mechanisms are used in order to build Hidden Markov Models which are more specialised and thus are deployed on training data that is specific to a set of cardholders which have similar spending behaviours. Clustering techniques were used in order to establish the association between different classes of transactions. Two different clustering algorithms were tested in order to determine the most effective one. Also, different Hidden Markov Models were built using different criteria for test data. The positive results achieved portray the effectiveness of these models in classifying fraudulent and legitimate transactions through a resultant percentage value which indicates the prominence of the transaction being contained in the respective model.peer-reviewe

An Empirical Study of AML Approach for Credit Card Fraud Detection—Financial Transactions

Credit card fraud is one of the flip sides of the digital world, where transactions are made without the knowledge of the genuine user. Based on the study of various papers published between 1994 and 2018 on credit card fraud, the following objectives are achieved: the various types of credit card frauds has identified and to detect automatically these frauds, an adaptive machine learning techniques (AMLTs) has studied and also their pros and cons has summarized. The various dataset are used in the literature has studied and categorized into the real and synthesized datasets.The performance matrices and evaluation criteria have summarized which has used to evaluate the fraud detection system.This study has also covered the deep analysis and comparison of the performance (i.e sensitivity, specificity, and accuracy) of existing machine learning techniques in the credit card fraud detection area.The findings of this study clearly show that supervised learning, card-not-present fraud, skimming fraud, and website cloning method has been used more frequently.This Study helps to new researchers by discussing the limitation of existing fraud detection techniques and providing helpful directions of research in the credit card fraud detection field

Machine Learning Techniques for Credit Card Fraud Detection

The term “fraud”, it always concerned about credit card fraud in our minds. And after the significant increase in the transactions of credit card, the fraud of credit card increased extremely in last years. So the fraud detection should include surveillance of the spending attitude for the person/customer to the determination, avoidance, and detection of unwanted behavior. Because the credit card is the most payment predominant way for the online and regular purchasing, the credit card fraud raises highly. The Fraud detection is not only concerned with capturing of the fraudulent practices, but also, discover it as fast as they can, because the fraud costs millions of dollar business loss and it is rising over time, and that affects greatly the worldwide economy. . In this paper we introduce 14 different techniques of how data mining techniques can be successfully combined to obtain a high fraud coverage with a high or low false rate, the Advantage and The Disadvantages of every technique, and The Data Sets used in the researches by researcher