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11 views18 pages

Ibm Project

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Sumit
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© © All Rights Reserved
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CAPSTONE PROJECT

CREDIT CARD FRAUD DETECTION

Presented By:
1. SUMIT SAXENA-INSTITUTE OF ENGINEERING AND
TECHNOLOGY, AGRA- BE(ECE)
OUTLINE
◼ Problem Statement
◼ Proposed System/Solution
◼ System Development Approach
◼ Algorithm & Deployment
◼ Result
◼ Conclusion
◼ Future Scope
◼ References
PROBLEM STATEMENT
Title: Credit Card Fraud Detection

Introduction: With the rise of online transactions, credit card


fraud has become a significant concern for financial institutions.

Challenges: Traditional methods are often inadequate due to


the evolving nature of fraudulent activities.

Impact: Fraudulent transactions result in substantial financial


losses and decreased customer trust.
PROPOSED SOLUTION
Objective: To develop a robust system that accurately identifies and prevents
fraudulent transactions.
◼ Approach: Utilize advanced machine learning algorithms to detect patterns and
anomalies in transaction data.
◼ Benefits: Real-time detection, reduced false positives, and enhanced security
◼ Data Collection:
◼ Bank Transaction Records: Obtain anonymized transaction data from
financial institutions.
◼ Public Datasets: Utilize publicly available datasets like the Kaggle Credit Card
Fraud Detection dataset.
◼ Synthetic Data: Generate synthetic data to simulate rare fraud scenarios
◼ Data Preprocessing:
◼ Handling Missing Values: Use imputation techniques to fill in missing data.
◼ Removing Duplicates: Ensure there are no duplicate transactions that could skew
results.
◼ Machine Learning Algorithm:
◼ Gradient Boosting: Highly effective for classification tasks with imbalanced data.
◼ Random Forest: Robust and interpretable model that can handle large datasets.
◼ Neural Networks: Suitable for complex pattern recognition and high-dimensional data.
SYSTEM APPROACH
System Requirements:
Hardware:
CPU: Multi-core processor for efficient computation.
GPU: Optional for faster training with neural networks.
RAM: Minimum 16GB for handling large datasets.
Storage: SSD with at least 500GB of space for storing data and models.
Software:
Operating System: Linux (preferred), Windows, or macOS.
Python Version: Python 3.8 or higher.
Development Environment: Jupyter Notebook, PyCharm, or VS Code for coding and visualization

Libraries Required to Build the Model:


◼ Pandas, Numpy - Data Manipulation
◼ Matplptlib , Seaborn- Data Visualisation
◼ scikit learn , XG- Boost - Machine Learning
◼ Tensor flow, pytorch - Deep learning
◼ Flask/ Django - Model development
◼ Jupyter Notebook - Additional tools
ALGORITHM & DEPLOYMENT
◼ Algorithm Selection:

◼ Overview: We have selected the Random Forest algorithm for predicting credit card fraud.
Random Forest is an ensemble learning method that operates by constructing multiple decision
trees during training and outputting the class that is the mode of the classes (classification) of
the individual trees.
◼ Justification: Random Forest is chosen due to its robustness to overfitting, ability to handle large
datasets with higher dimensionality, and effectiveness in classifying imbalanced data, which is
common in fraud detection.

◼ Data Input:

◼ Features Used:
◼ Transaction Amount: The monetary value of each transaction.
◼ Transaction Time: Time of the day when the transaction occurs.
◼ Merchant Category: The type of merchant where the transaction takes place.
◼ Customer Location: Geographical location of the customer.
◼ Transaction Type: Online or in-person transactions.
◼ Historical Data: Past transaction behavior of the customer, including frequency and volume of
◼ Training Process:

◼ Historical Data: The algorithm is trained using historical transaction


data that includes both legitimate and fraudulent transactions.
◼ Cross-Validation: Implement k-fold cross-validation to ensure the
model generalizes well to unseen data and to prevent overfitting.
◼ Hyperparameter Tuning: Use techniques like Grid Search or Random
Search to find the optimal parameters for the Random Forest model,
such as the number of trees and maximum depth of each tree.
◼ Imbalanced Data Handling: Techniques like SMOTE (Synthetic Minority
Over-sampling Technique) are employed to balance the dataset and
improve the detection of fraudulent transactions.
◼ Prediction Process:

◼ Real-Time Input: The trained Random Forest model takes real-time


transaction data as input, including the same features used during
training.
◼ Prediction Output: The model outputs a probability score indicating the
likelihood of a transaction being fraudulent. Transactions with scores
above a certain threshold are flagged for further investigation.
◼ Continuous Learning: The model is periodically retrained with new data
to adapt to evolving fraud patterns and maintain high accuracy.
RESULT
RESULT

Correlation Matrix. Confusion Matrix


CONCLUSION
◼ Summary of Findings:

◼ Model Performance: The Random Forest model demonstrated high accuracy in


detecting fraudulent transactions, significantly reducing false positives and false
negatives.
◼ Key Features: Transaction amount, time, and customer behavior were among the
most influential features in predicting fraud.
◼ Real-Time Detection: The model effectively processed real-time data, providing
timely alerts for suspicious activities.

◼ Effectiveness of the Proposed Solution:

◼ Robustness: The ensemble approach of Random Forest proved to be robust against


overfitting and capable of handling the imbalanced nature of fraud data.
◼ Scalability: The solution is scalable and can be deployed on cloud platforms,
ensuring it can handle large volumes of transaction data.
◼ Challenges Encountered:

◼ Data Imbalance: One of the primary challenges was dealing with the highly
imbalanced nature of the dataset, which required careful handling through
techniques like SMOTE.
◼ Feature Selection: Identifying the most relevant features from a large set of
variables was complex and required extensive analysis.
◼ Real-Time Processing: Ensuring the model could process transactions in real-time
without latency was a critical technical hurdle.

◼ Potential Improvements:

◼ Algorithm Enhancement: Exploring advanced algorithms such as Neural


Networks or Gradient Boosting Machines for potentially higher accuracy.
◼ Feature Engineering: Continual refinement of features and incorporating new
data sources to improve model performance.
◼ User Behavior Analysis: Integrating deeper user behavior analytics to predict
FUTURE SCOPE
◼ Future Research Directions:

◼ User Behavior Analytics: Enhance fraud prediction through


deeper user behavior analysis.
◼ Collaborative Filtering: Identify fraud based on patterns in similar
user groups.
◼ Privacy-Preserving Techniques: Ensure data security and
compliance with privacy regulations.
REFERENCES
◼ Geeks for geeks
◼ .Dal Pozzolo, A., et al. (2015). Calibrating probability with undersampling
for unbalanced classification. Proceedings of the Symposium on
Computational Intelligence and Data Mining, 410-417.
◼ Liao, W., & Vemuri, V. R. (2017). A comparative evaluation of credit card
fraud detection using supervised, unsupervised, and hybrid techniques.
Information Sciences, 2017, 409-428
◼ Breiman, L. (2001). Random forests. Machine Learning, 45(1), 5-32.
◼ Chen, T., & Guestrin, C. (2016). XGBoost
◼ Ahmad, S., et al. (2018). A survey of fraud detection techniques in credit
card transactions. Journal of Network and Computer Applications, 107,
71-97
THANK YOU

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