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    A Comparative Analysis of Credit Card Fraud Detection Using Machine Learning Techniques

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    Khairunnisa Safi
    This document discusses using machine learning techniques to detect credit card fraud. It analyzes credit card transaction data from European cardholders using classification algorithms like logistic regression, k-means clustering, and neural networks. Due to the skewed nature of the data, with very few fraudulent transactions, sampling and preprocessing techniques are applied. The goal is to accurately classify transactions as legitimate or fraudulent to the highest degree while minimizing false negatives, where fraud slips through. Hardware and software requirements for the project are also outlined.

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    A Comparative Analysis of Credit Card Fraud Detection Using Machine Learning Techniques

    Uploaded by

    Khairunnisa Safi
    169 views2 pages
    This document discusses using machine learning techniques to detect credit card fraud. It analyzes credit card transaction data from European cardholders using classification algorithms like logistic regression, k-means clustering, and neural networks. Due to the skewed nature of the data, with very few fraudulent transactions, sampling and preprocessing techniques are applied. The goal is to accurately classify transactions as legitimate or fraudulent to the highest degree while minimizing false negatives, where fraud slips through. Hardware and software requirements for the project are also outlined.

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    A Comparative Analysis of Credit Card Fraud Detection using Machine Learning Techniques

    Original Title

    A Comparative Analysis of Credit Card Fraud Detection using Machine Learning Techniques (1)

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    This document discusses using machine learning techniques to detect credit card fraud. It analyzes credit card transaction data from European cardholders using classification algorithms like logistic regression, k-means clustering, and neural networks. Due to the skewed nature of the data, with very few fraudulent transactions, sampling and preprocessing techniques are applied. The goal is to accurately classify transactions as legitimate or fraudulent to the highest degree while minimizing false negatives, where fraud slips through. Hardware and software requirements for the project are also outlined.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    169 views2 pages

    A Comparative Analysis of Credit Card Fraud Detection Using Machine Learning Techniques

    Uploaded by

    Khairunnisa Safi
    This document discusses using machine learning techniques to detect credit card fraud. It analyzes credit card transaction data from European cardholders using classification algorithms like logistic regression, k-means clustering, and neural networks. Due to the skewed nature of the data, with very few fraudulent transactions, sampling and preprocessing techniques are applied. The goal is to accurately classify transactions as legitimate or fraudulent to the highest degree while minimizing false negatives, where fraud slips through. Hardware and software requirements for the project are also outlined.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    A Comparative Analysis of Credit Card Fraud

    Detection using Machine Learning Techniques.

    ABSTRACT
    Financial fraud is an ever-growing menace with far consequences in the financial industry.
    Data mining had played an imperative role in the detection of credit card fraud in online
    transactions. Credit card fraud detection, which is a data mining problem, becomes challenging
    due to two major reasons – first, the profiles of normal and fraudulent behaviours change
    constantly and secondly, credit card fraud data sets are highly skewed. The performance of fraud
    detection in credit card transactions is greatly affected by the sampling approach on dataset,
    selection of variables and detection technique(s) used. This work investigates the performance of
    different classification algorithm on highly skewed credit card fraud data. Dataset of credit card
    transactions is sourced from European cardholders containing 284,807 transactions. A hybrid
    technique of under-sampling and oversampling is carried out on the skewed data. The three
    techniques are applied on the raw and pre-processed data. The work is implemented in Python.
    The performance of the techniques is evaluated based on accuracy, sensitivity, specificity,
    precision.

    INTRODUCTION
    Financial fraud is an ever growing menace with far reaching consequences in the finance
    industry, corporate organizations, and government. Fraud can be defined as criminal deception
    with intent of acquiring financial gain. High dependence on internet technology has enjoyed
    increased credit card transactions. As credit card transactions become the most prevailing mode of
    payment for both online and offline transaction, credit card fraud rate also accelerates. Credit card
    fraud can come in either inner card fraud or external card fraud. Inner card fraud occurs as a result
    of consent between cardholders and bank by using false identity to commit fraud while the external
    card fraud involves the use of stolen credit card to get cash through dubious means. A lot of
    researches have been devoted to detection of external card fraud which accounts for majority of
    credit card frauds. Detecting fraudulent transactions using traditional methods of manual detection
    is time consuming and inefficient, thus the advent of big data has made manual methods more
    impractical. However, financial institutions have focused attention to recent computational
    methodologies to handle credit card fraud problem. Data mining technique is one notable method
    used in solving credit fraud detection problem. Credit card fraud detection is the process of
    identifying those transactions that are fraudulent into two classes of legitimate (genuine) and
    fraudulent transactions. Credit card fraud detection is based on analysis of a card’s spending
    behavior.
    PROBLEM STATEMENT
    Our goal is to implement 3 different machine learning models in order to classify, to the
    highest possible degree of accuracy, credit card fraud from a dataset gathered in Europe in 2 days
    in September 2013. After initial data exploration, we knew we would implement a logistic
    regression model, a k-means clustering model, and a neural network. Some challenges we
    observed from the start were the huge imbalance in the dataset: frauds only account for 0.172% of
    fraud transactions. In this case, it is much worse to have false negatives than false positives in our
    predictions because false negatives mean that someone gets away with credit card fraud. False
    positives, on the other hand, merely cause a complication and possible hassle when a cardholder
    must verify that they did, in fact, complete said transaction (and not a thief).
    SYSTEM ARCHITECTURE

    Figure. Project Flow diagram

    HARDWARE REQUIREMENTS
    • System : Pentium IV 2.4 GHz.
    • Hard Disk : 500 GB.
    • Ram : 4 GB
    • Any desktop / Laptop system with above configuration or higher level

    SOFTWARE REQUIREMENTS
    • Operating system : Windows XP / 7
    • Coding Language : Python 3.x and above
    • Scripting tool : Jupyter notebook
    • Libraries : Pandas, Numpy, Sklearn, Matplotlib, keras.

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