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  • Use of HMM For Credit Card Fraud Detection

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    Arshia Sultana
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    The document discusses using Hidden Markov Models (HMM) for credit card fraud detection. A fraud detection system at a credit card issuing bank verifies incoming transactions, checking card details and purchase values against the cardholder's spending profile, addresses, and other information to identify anomalies without knowing item details. If a transaction is identified as potentially fraudulent, an alarm is raised and the transaction declined to protect the cardholder from unauthorized use.

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    The document discusses using Hidden Markov Models (HMM) for credit card fraud detection. A fraud detection system at a credit card issuing bank verifies incoming transactions, checking card details and purchase values against the cardholder's spending profile, addresses, and other information to identify anomalies without knowing item details. If a transaction is identified as potentially fraudulent, an alarm is raised and the transaction declined to protect the cardholder from unauthorized use.

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    19 views1 page

    Use of HMM For Credit Card Fraud Detection

    Uploaded by

    Arshia Sultana
    The document discusses using Hidden Markov Models (HMM) for credit card fraud detection. A fraud detection system at a credit card issuing bank verifies incoming transactions, checking card details and purchase values against the cardholder's spending profile, addresses, and other information to identify anomalies without knowing item details. If a transaction is identified as potentially fraudulent, an alarm is raised and the transaction declined to protect the cardholder from unauthorized use.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    USE OF HMM FOR CREDIT CARD FRAUD DETECTION

    A fraud detection system runs at a credit card issuing bank. Each incoming transaction is

    submitted to the FDS for verification. FDS receives the card details and the value of purchase to

    verify whether the transaction is genuine or not. The types of goods that are bought in that transaction are not known to the FDS. It tries to find any anomaly in the transaction based on the

    spending profile of the cardholder, shipping address and billing address, etc. If the FDS confirms

    the transaction to be malicious, it raises an alarm and the issuing bank declines the transaction.

    The concerned cardholder may then be contacted and alerted about the possibility that the card is

    compromised. In this section we explain how HMM can be used for credit card fraud detection.

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