ANALYSIS ON CREDIT CARD FRAUD DETECTION

USING MACHINE LEARNING APPROACHES

Submitted to

SAVEETHA INSTITUTE OF MEDICAL AND TECHNICAL SCIENCES

in partial fulfilment for the award of the degree of

BACHELOR OF ENGINEERING IN COMPUTER SCIENCE AND

ENGINEERING

By
PAWAN KUMAR
(Reg. No. 191511034)

Supervisor
Mr.FAHAD IQBAL

SAVEETHA SCHOOL OF ENGINEERING

SIMATS, CHENNAI – 602 105

JAN 2019
 BONAFIDE CERTIFICATE

Certified that this project report “ANALYSIS ON CREDIT CARD FRAUD

DETECTION USING MACHINE LEARNING ALGORITHMS” is the
bonafide work of “PAWAN KUMAR (Reg. No. 191511034) who carried out the
project work under my supervision.

SIGNATURE SIGNATURE

Dr. CHOKKALINGAM Mr. FAHAD IQBAL

HEAD OF THE DEPARTMENT SUPERVISOR
Department of CSE Assistant Professor, Dept. of CSE
Saveetha School of Engineering Saveetha School of Engineering
Saveetha University Saveetha University

INTERNAL EXAMINER EXTERNAL EXAMINER

 DECLARATION BY THE CANDIDATE

I declare that the report entitled “ANALYSIS ON CREDIT CARD FRAUD

DETECTION USING MACHINE LEARNING ALGORITHMS ” submitted by
me for the degree of Bachelor of Engineering is the record of the project work carried
out by me under the guidance of “Mr. FAHAD IQBAL” and furthermore this work
has not formed the basis for the award of any degree or diploma in this or any other
University or other similar institution of higher learning.

SIGNATURE

PAWAN KUMAR
(Reg. No. 191511034)
 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 paper investigates the performance of naïve bayes, k-nearest
neighbor and logistic regression 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 preprocessed data. The work is implemented in Python. The
performance of the techniques is evaluated based on accuracy, sensitivity, specificity, precision,
Matthews correlation coefficient and balanced classification rate. The results shows of optimal
accuracy for naïve bayes, k-nearest neighbor and logistic regression classifiers are 97.92%,
97.69% and 54.86% respectively. The comparative results show that k-nearest neighbour performs
better than naïve bayes and logistic regression techniques.
Keywords—credit card fraud; data mining; naïve bayes; decision tree; logistic regression,
comparative analysis
 ACKNOWLEDGEMENT

This project work would not have been possible without the contribution of many people.

It gives me immense pleasure to express my profound gratitude to our honorable Chancellor

Dr. N. M. Veeraiyan, Saveetha University, for his blessings and for being a source of inspiration.

I sincerely thank our Vice Chancellor Dr. Jawahar Nesan for his visionary thoughts and support.

I am indebted to extend my gratitude to our Director madam Mrs. Ramya Deepak, Saveetha

School of Engineering, for facilitating us all the facilities and extended support to gain valuable

education and learning experience.

I register my special thanks to Dr. D. Dhanasekaran, Principal, Saveetha School of

Engineering Dr.S.P.Chokkalingam ,HOD, Department of Computer Science And Engineering,

for the support given to me in the successful conduct of this project. I wish to express my sincere

gratitude to my supervisor Mr. Fahad Iqbal, for her inspiring guidance, personal involvement

and constant encouragement during the entire course of this work.

I am grateful to Project Coordinators, Review Panel External and Internal Members and

the entire faculty of the Department of Computer Science and Engineering, for their constructive

criticisms and valuable suggestions which have been a rich source to improve the quality of this

work.
 TABLE OF CONTENTS

CHAPTER NO. TITLE PAGE NO

ABSTRACT IV

LIST OF FIGURES VIII

1 INTRODUCTION 1

1.1 PROBLEM STATEMENT 2

1.2 OBJECTIVES 3

1.3 SCOPE OF THE PROJECT 4

2 LITERATURE REVIEW 4

3 PROBLEM STATEMENT AND METHODOLOGY

3.1 PROBLEM STATEMENT 5

3.2 METHODOLOGY 6

3.2.1 EXISTING SYSTEM 7

3.2.2 PROPOSED SYSTEM

3.4 SYSTEM ARCHITECTURE 12

3.5 UML DIAGRAMS

3.5.1 USE CASE DIAGRAM 13

3.5.2 CLASS DIAGRAM 17

3.5.3 SEQUENCE DIAGRAM 15

3.5.4 ACTIVITY DIAGRAM 18

3.6 MODULES AND DESCRIPTION 19

3.6.1 HOME PAGE 20

3.6.2 COMPOSING MESSAGE

3.6.3 CREATING A SECRET CODE 21

3.6.4 DECRYPTING THE MESSAGE 21

3.6.5 ENCRYPTED IMAGE 22

CONCLUSION AND REFERENCES 24

 LIST OF FIGURES

FIGURE
NO. TITLE PAGE NO.

3.2 Architecture Diagram 20

3.3.1 Use case Diagram 21

3.3.2 Class Diagram 22

3.3.3 Sequence Diagram 23

3.3.4 Collaboration Diagram 24

3.3.5 Deployment Diagram 24

3.3.6 DFD Diagram 25

LIST OF ABBREVIATIONS
INTRODUCTION