Professional Documents
Culture Documents
Analysis of Credit Card Fraud Detection Methods: January 2009
Analysis of Credit Card Fraud Detection Methods: January 2009
Analysis of Credit Card Fraud Detection Methods: January 2009
net/publication/228749252
CITATIONS READS
13 4,050
2 authors, including:
R.Dhanapal R
KCSC
38 PUBLICATIONS 703 CITATIONS
SEE PROFILE
All content following this page was uploaded by R.Dhanapal R on 10 June 2014.
Abstract—Along with the great increase in credit card III. THE CLUSTERING MODEL
transactions, credit card fraud has become increasingly Clustering helps in grouping the data into similar
rampant in recent years. In Modern day the fraud is one of
clusters that helps in uncomplicated retrieval of data [3].
the major causes of great financial losses, not only for
merchants, individual clients are also affected. Three Cluster analysis is a technique for breaking data down
methods to detect fraud are presented. Firstly, clustering into related components in such a way that patterns and
model is used to classify the legal and fraudulent transaction order becomes visible [4]. This model is based on the use
using data clusterization of regions of parameter value. of the parameters’ data clusterization regions.
Secondly, Gaussian mixture model is used to model the
probability density of credit card user’s past behavior so
that the probability of current behavior can be calculated to In this system 24 parameters of transactions are used
detect any abnormalities from the past behavior. Lastly,
Bayesian networks are used to describe the statistics of a TABLE I
particular user and the statistics of different fraud INPUT ATTRIBUTES
scenarios. The main task is to explore different views of the Input attribute Example of attribute
same problem and see what can be learned from the value
application of each different technique. Message type 1031
Type of transaction 700
Index Terms—Clustering, Credit card Fraud Detection,
Bayesian Networks Network identification 25
Day of registration in system 2
I. INTRODUCTION
720
The use of credit cards is prevalent in modern day for classification. (Few attributes are described in Table
society. Detecting credit card fraud is a difficult task I).To finds regions of data clusterization a corresponding
when using normal procedures, so the development of the analysis should be provided at first. For example, if in the
credit card fraud detection model has become of training data we observed values from Table II, then the
significance, whether in the academic or business regions of clusterization from Table III will be found.
community recently. In order to determine these regions of clusterization
In this paper, three approaches to fraud detection are first its need to find the maximum difference (DIFFmax)
presented. The clustering model, the probability density between values of an attribute in the training data. This
estimation method and the model based on Bayesian difference (DIFFmax) is split into Ninterval segments. Ninterval
networks. This paper investigates the usefulness of is the binary logarithm of the attribute values account
applying different approaches to a problem of Credit card Npoints. In general, Ninterval can be found using another way
fraud detection. of looking. Such calculation of Ninterval is based on the
assumption that a twofold increase of Npoints will be equal
II. RELATED WORK ON CREDITCARD FRAUD to Ninterval plus one.
DETECTION
TABLE II
From the work of view for preventing credit card VALUES OF ONE ATTRIBUTE
fraud, more research works were carried out with special
emphasis on data mining and neural networks. Sam and Number of value
Karl [1] suggest a credit card fraud detection system Value
1 1200
using Bayesian and neural network techniques to learn
2 1220
models of fraudulent credit card transactions. Kim and
3 1260
Kim have identified skewed distribution of data and mix
4 1270
of Legitimate and fraudulent transactions as the two main
5 720
reasons for the complexity of credit card fraud detection
6 730
[2].This paper investigates the usefulness of applying
7 780
different learning approaches.
8 800
126
© 2009 ACADEMY PUBLISHER
SHORT PAPER
International Journal of Recent Trends in Engineering, Vol 2, No. 3, November 2009
to a specific user based on emerging data. By inserting [5] Dr.R.Dhanapal, P.Sarasu and D.Sharmili, “An intelligent
evidence in these networks and propagating it through the system for visualization of intelligence of learners”,
network, the probability of the measurement x less than International Journal of Recent Trends in
two above mentioned hypotheses is obtained. This Engineering,Vol.1,No.1,May 2009
[6] J. Friedman, T. Hastie, and R. Tibshirani, “Additive
means, it gives judgments to what degree observed user logistic regression: a statistical view of boosting,” The
behavior meets typical fraudulent or non fraudulent Annals of Statistics, vol. 28, no. 2, pp. 337–407, 2000.
behavior. These quantities we call p(x│NF) and p (x│F). [7] S.J. Nowlan. Soft Competitive Adaptation: Neural
By postulating the probability of fraud P (F) and P (NF) = Network Learning Algorithms based on Fitting Statistical
1-P(F) in general and by applying Bayes’ rule, it gives Mixtures. PhD thesis, School of Computer Science,
the probability of fraud, given the measurement x, Carnegie Mellon University, Pittsburgh, 1991.
[8] Jaakko Hollmén, “Novelty filter for fraud detection in
P (F) p (x│F) mobile communications networks”. Technical Report A48,
P (F│x) = __________ (4) Helsin ki University of Technology, Laboratory of
Computer and Information Science, October 1997
p(x) [9] L. Mukhanov, “Using bayesian belief networks for credit
card fraud detection,” in Proc. of the IASTED
Where the denominator p(x) can be calculated as International conference on Artificial Intelligence and
Applications, Insbruck, Austria, Feb. 2008, pp. 221– 225.
P(x) = P (F)p(x│F)+ P(NF)p(x│NF) (5)
REFERENCES
[1] Sam Maes, Karl Tuyls, Bram Vanschoenwinkel, Bernard
Manderick. Credit Card Fraud Detection Using Bayesian
and Neural Networks First International NAISO Congress
on Neuro Fuzzy Technologies, Havana, Cuba. 2002.
[2] M.J. Kim and T.S. Kim, “A Neural Classifier with Fraud
Density Map for Effective Credit Card Fraud Detection,”
Proc. International Conference on Intelligent Data
Engineering and Automated Learning, Lecture Notes in
Computer Science, Springer Verlag, no. 2412, pp. 378-
383, 2002.
[3] Dr.R.Dhanapal, “An intelligent information retrieval
agent”, Elsevier International Journal on Knowledge Based
Systems 2008
[4] Binu Thomas and Raju, “A Novel Fuzzy Clustering
Method for Outlier Detection in Data Mining”,
International Journal of Recent Trends in Engineering,
Vol.1, No.2, May 2009
128
© 2009 ACADEMY PUBLISHER