Artificial neural network technique for improving prediction of credit card default: A stacked sparse autoencoder approach

Presently, the use of a credit card has become an integral part of contemporary banking and financial system. Predicting potential credit card defaulters or debtors is a crucial business opportunity for financial institutions. For now, some machine learning methods have been applied to achieve this task. However, with the dynamic and imbalanced nature of credit card default data, it is challenging for classical machine learning algorithms to proffer robust models with optimal performance. Research has shown that the performance of machine learning algorithms can be significantly improved when provided with optimal features. In this paper, we propose an unsupervised feature learning method to improve the performance of various classifiers using a stacked sparse autoencoder (SSAE). The SSAE was optimized to achieve improved performance. The proposed SSAE learned excellent feature representations that were used to train the classifiers. The performance of the proposed approach is compared with an instance where the classifiers were trained using the raw data. Also, a comparison is made with previous scholarly works, and the proposed approach showed superior performance over other methods

Predicting customer behavioural patterns using a virtual credit card transactions dataset

Nowadays, many businesses are resorting to data mining techniques on their data, to save costs and time, as well as to understand customers’ needs. Analysing such data can leader to higher profits and higher customer satisfaction. This paper presents a data mining study that is applied on millions of transactional records collected for a number of years, by a leading virtual credit card company based in Malta. In this study, 2 machine learning techniques, namely Artificial Neural Networks (ANN) and Gradient Boosting (GBM), are analysed to identify the best modelling framework that predicts the churning behaviour of this company’s customers. Apart from helping the marketing department of this firm by providing a model that predicts churning customers, we contribute to literature by identifying the minimum amount of customer activity needed to predict churn. In addition, we also analyse the “cold start” problem by performing a time-series experiment based on the few data available at the beginning of the customer purchase history.peer-reviewe

Machine learning-driven credit risk: a systemic review

Credit risk assessment is at the core of modern economies. Traditionally, it is measured by statistical methods and manual auditing. Recent advances in financial artificial intelligence stemmed from a new wave of machine learning (ML)-driven credit risk models that gained tremendous attention from both industry and academia. In this paper, we systematically review a series of major research contributions (76 papers) over the past eight years using statistical, machine learning and deep learning techniques to address the problems of credit risk. Specifically, we propose a novel classification methodology for ML-driven credit risk algorithms and their performance ranking using public datasets. We further discuss the challenges including data imbalance, dataset inconsistency, model transparency, and inadequate utilization of deep learning models. The results of our review show that: 1) most deep learning models outperform classic machine learning and statistical algorithms in credit risk estimation, and 2) ensemble methods provide higher accuracy compared with single models. Finally, we present summary tables in terms of datasets and proposed models

Unsupervised Intrusion Detection with Cross-Domain Artificial Intelligence Methods

Cybercrime is a major concern for corporations, business owners, governments and citizens, and it continues to grow in spite of increasing investments in security and fraud prevention. The main challenges in this research field are: being able to detect unknown attacks, and reducing the false positive ratio. The aim of this research work was to target both problems by leveraging four artificial intelligence techniques. The first technique is a novel unsupervised learning method based on skip-gram modeling. It was designed, developed and tested against a public dataset with popular intrusion patterns. A high accuracy and a low false positive rate were achieved without prior knowledge of attack patterns. The second technique is a novel unsupervised learning method based on topic modeling. It was applied to three related domains (network attacks, payments fraud, IoT malware traffic). A high accuracy was achieved in the three scenarios, even though the malicious activity significantly differs from one domain to the other. The third technique is a novel unsupervised learning method based on deep autoencoders, with feature selection performed by a supervised method, random forest. Obtained results showed that this technique can outperform other similar techniques. The fourth technique is based on an MLP neural network, and is applied to alert reduction in fraud prevention. This method automates manual reviews previously done by human experts, without significantly impacting accuracy