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IMPROVING CREDIT CARD FRAUD DETECTION USING TRANSFER LEARNING AND DATA RESAMPLING TECHNIQUES
This Culminating Experience Project explores the use of machine learning algorithms to detect credit card fraud. The research questions are: Q1. What cross-domain techniques developed in other domains can be effectively adapted and applied to mitigate or eliminate credit card fraud, and how do these techniques compare in terms of fraud detection accuracy and efficiency? Q2. To what extent do synthetic data generation methods effectively mitigate the challenges posed by imbalanced datasets in credit card fraud detection, and how do these methods impact classification performance? Q3. To what extent can the combination of transfer learning and innovative data resampling techniques improve the accuracy and efficiency of credit card fraud detection systems when dealing with imbalanced datasets, and what novel strategies can be developed to address this common challenge?
The main findings are: Q1. Unconventional cross-domain methods improved fraud detection, holding promise for enhanced security. Q2. The problems caused by unbalanced datasets in credit card fraud detection were effectively addressed by the synthetic data generation techniques SMOTE and ADASYN, resulting in a more balanced dataset suitable for fraud classification. Q3. The combination of neural networks and data resampling techniques, such as SMOTE and ADASYN, significantly improved credit card fraud detection accuracy.
The main conclusions are: Q1. Cross-domain methods are useful for credit card fraud detection, especially when it comes to online transactions. Q2. When used with various classifiers, neural networks show remarkable accuracy rates: 97% for unbalanced data, 99.47% for SMOTE, and 99.11% for ADASYN Q3. A fraud recall of 0.99 is obtained by the model evaluation on imbalanced data, with 12,155 right predictions out of 12,336 and 181 incorrect ones. The identified areas for further study encompass the testing of our model on larger datasets and the optimization of hyperparameters for further enhancement
Adversarial Learning in Real-World Fraud Detection: Challenges and Perspectives
Data economy relies on data-driven systems and complex machine learning
applications are fueled by them. Unfortunately, however, machine learning
models are exposed to fraudulent activities and adversarial attacks, which
threaten their security and trustworthiness. In the last decade or so, the
research interest on adversarial machine learning has grown significantly,
revealing how learning applications could be severely impacted by effective
attacks. Although early results of adversarial machine learning indicate the
huge potential of the approach to specific domains such as image processing,
still there is a gap in both the research literature and practice regarding how
to generalize adversarial techniques in other domains and applications. Fraud
detection is a critical defense mechanism for data economy, as it is for other
applications as well, which poses several challenges for machine learning. In
this work, we describe how attacks against fraud detection systems differ from
other applications of adversarial machine learning, and propose a number of
interesting directions to bridge this gap
Credit Card Fraud Detection Using Asexual Reproduction Optimization
As the number of credit card users has increased, detecting fraud in this
domain has become a vital issue. Previous literature has applied various
supervised and unsupervised machine learning methods to find an effective fraud
detection system. However, some of these methods require an enormous amount of
time to achieve reasonable accuracy. In this paper, an Asexual Reproduction
Optimization (ARO) approach was employed, which is a supervised method to
detect credit card fraud. ARO refers to a kind of production in which one
parent produces some offspring. By applying this method and sampling just from
the majority class, the effectiveness of the classification is increased. A
comparison to Artificial Immune Systems (AIS), which is one of the best methods
implemented on current datasets, has shown that the proposed method is able to
remarkably reduce the required training time and at the same time increase the
recall that is important in fraud detection problems. The obtained results show
that ARO achieves the best cost in a short time, and consequently, it can be
considered a real-time fraud detection system
Advanced analytical methods for fraud detection: a systematic literature review
The developments of the digital era demand new ways of producing goods and rendering
services. This fast-paced evolution in the companies implies a new approach from the
auditors, who must keep up with the constant transformation. With the dynamic
dimensions of data, it is important to seize the opportunity to add value to the companies.
The need to apply more robust methods to detect fraud is evident.
In this thesis the use of advanced analytical methods for fraud detection will be
investigated, through the analysis of the existent literature on this topic.
Both a systematic review of the literature and a bibliometric approach will be applied to
the most appropriate database to measure the scientific production and current trends.
This study intends to contribute to the academic research that have been conducted, in
order to centralize the existing information on this topic
Attention Paper: How Generative AI Reshapes Digital Shadow Industry?
The rapid development of digital economy has led to the emergence of various
black and shadow internet industries, which pose potential risks that can be
identified and managed through digital risk management (DRM) that uses
different techniques such as machine learning and deep learning. The evolution
of DRM architecture has been driven by changes in data forms. However, the
development of AI-generated content (AIGC) technology, such as ChatGPT and
Stable Diffusion, has given black and shadow industries powerful tools to
personalize data and generate realistic images and conversations for fraudulent
activities. This poses a challenge for DRM systems to control risks from the
source of data generation and to respond quickly to the fast-changing risk
environment. This paper aims to provide a technical analysis of the challenges
and opportunities of AIGC from upstream, midstream, and downstream paths of
black/shadow industries and suggest future directions for improving existing
risk control systems. The paper will explore the new black and shadow
techniques triggered by generative AI technology and provide insights for
building the next-generation DRM system
Transfer Learning Strategies for Credit Card Fraud Detection.
Credit card fraud jeopardizes the trust of customers in e-commerce transactions. This led in recent years to major advances in the design of automatic Fraud Detection Systems (FDS) able to detect fraudulent transactions with short reaction time and high precision. Nevertheless, the heterogeneous nature of the fraud behavior makes it difficult to tailor existing systems to different contexts (e.g. new payment systems, different countries and/or population segments). Given the high cost (research, prototype development, and implementation in production) of designing data-driven FDSs, it is crucial for transactional companies to define procedures able to adapt existing pipelines to new challenges. From an AI/machine learning perspective, this is known as the problem of transfer learning. This paper discusses the design and implementation of transfer learning approaches for e-commerce credit card fraud detection and their assessment in a real setting. The case study, based on a six-month dataset (more than 200 million e-commerce transactions) provided by the industrial partner, relates to the transfer of detection models developed for a European country to another country. In particular, we present and discuss 15 transfer learning techniques (ranging from naive baselines to state-of-the-art and new approaches), making a critical and quantitative comparison in terms of precision for different transfer scenarios. Our contributions are twofold: (i) we show that the accuracy of many transfer methods is strongly dependent on the number of labeled samples in the target domain and (ii) we propose an ensemble solution to this problem based on self-supervised and semi-supervised domain adaptation classifiers. The thorough experimental assessment shows that this solution is both highly accurate and hardly sensitive to the number of labeled samples
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