A CAPSTONE PROJECT REPORT

ON

“Credit Card Fraud-Detection ”

PROGRAM CO 5 I
CODE:-
COURSE NAME:- Capstone Project Planning
Course code:- 22058

DEPARTMENT OF COMPUTER ENGINEERING

(2021-2022)

BY

ROLL NO. NAME OF STUDENTS SIGN.

2402 Roshan Bachhav
2404 Ashwini Bhadane
2410 Arya Deopurkar
2417 Sangita Hazra

UNDER THE GUIDANCE OF

Mrs.V.C.Sanap

KENNEDY ROAD,NEAR R.T.O., PUNE 411001

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ALL INDIA SHRI SHIVAJI MEMERIAL SOCIETY’S POLYTECHNIC,
PUNE -1

COMPUTER ENGINEERING DEPARTMENT

VISION AND MISSION OF THE INSTITUTE

 VISION:
Achieve excellence in quality technical education by imparting knowledge, skills and
abilities to build a better technocrat.

 MISSION:
M1: Empower the students by inculcating various technical and soft skills.

M2:Upgrade teaching-learning process and industry-institute interaction continuously.

VISION AND MISSION OF THE COMPUTER DEPARTMENT

 VISION:
“Enhance skills by providing value based technical education for fulfilling global needs in
the field of computer engineering.”

 MISSION:

M1: To provide quality education in computer engineering by improving psychomotor

skills.

M2: To develop positive attitude, communication skills, team spirit and entrepreneurship.

M3: To develop awareness about societal and ethical responsibility for professionalism.

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 PROGRAM OUTCOMES (POs)
PO1 Basic knowledge: An ability to apply knowledge of basic mathematics, science and
engineering to solve the engineering problems.
PO2 Discipline knowledge: An ability to apply discipline - specific knowledge to solve
core and/or applied engineering problems.
PO3 Experiments and practice: An ability to plan and perform experiments and practices
and to use the results to solve engineering problems.
PO4 Engineering Tools: Apply appropriate technologies and tools with an understanding
of the limitations.
PO5 The engineer and society: Demonstrate knowledge to assess societal, health, safety,
legal and cultural issues and the consequent responsibilities relevant to engineering
practice.
PO6 Environment and sustainability: Understand the impact of the engineering solutions
in societal and environmental contexts, and demonstrate the knowledge and need for
sustainable development.
PO7 Ethics: Apply ethical principles and commit to professional ethics and responsibilities
and normsof the engineering practice.
PO8 Individual and team work: Function effectively as an individual, and as a member or
leader in diverse/multidisciplinary teams.
PO9 Communication: An ability to communicate effectively.
PO10 Life-long learning: Recognize the need for, and have the preparation and ability to
engage in Independent and life-long learning in the context of technological changes.

PROGRAM SPECIFIC OUTCOMES (PSO)

The Diploma in Computer Engineering will prepare students to attain:

 PSO 1: Apply computing knowledge with standard practices to develop software.

 PSO 2:Maintain Computer Hardware and Software System

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 CERTIFICATE

This is to certify that Group Project entitled “ Credit Card Fraud-Detection ” has
been completed under Capstone Project Planning for the Computer Engineering
Department , Batch 2021-22.

The members of the team:

1. ROSHAN BACHHAV 2. ASHWINI BHADANE

3. ARYA DEOPURKAR 4. SANGITA HAZRA

Project Guide

Mrs. V.C. Sanap

Computer Engineering Department

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 Acknowledgements

The satisfaction & euphoria that accompany the successful completion of any task would be
incomplete without the mention of the people , who made it possible , whose constant guidance
& encouragement aided us in the completion of our project .

Its our priviledge to express voice of gratitude and respect to all those who guided us and
inspired us in the completion of this project.

We would like to thank our guide Mrs.V.C Sanap for her precious guidance & effectually care
which happens to be the psyche of this report.

We would also like to express our heartfelt gratitude to Mr.V.N.Kukre, HOD of Computer
Department , for his continuous encouragement & valuable guidance .

And of course , we would like to thank the management of AISSMS Polytechnic for providing us
such an opportunity to learn from these experience.

Thanks to all!!!

Signature

Roll No Name
2402 ROSHAN BACHHAV
2404 ASHWINI BHADANE
2410 ARYA DEOPURKAR
2417 SANGITA HAZRA

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 Abstract

Credit card fraud detection is presently the most frequently occurring problem in the present
world which results in huge financial losses.The number of online transactions has grown in
larger quantities & online credit card transactions holds a huge share of these transactions.
Therefore, banks & financial institutions offer credit card fraud detection applications much
value & demand. Credit card fraud generally happens when the card was stolen for any of the
unauthorized purposes or even when the fraudster uses the credit card information for his use .

It is vital that credit card companies are able to identify fraudlent credit card transactions so that
customers are not charged for items that they did not purchase. Such problems can be tackled with
Data science and its importance, along with Machine learning , cannot be overstated. This project
intends to illustrate the modeling of a data set using machine learning with Credit Card Fraud
Detection. This problem includes modeling past credit card transactions with with the data of the
ones that turned out to be fraud. This model is used to recognize whether a new transaction is
fraudulent or not. Our objective here is to detect 100% of the fraudulent transactions while
minimizing the incorrect fraud classifications . In this process , we have focused on analyzing
and pre-processing data sets as well as the deployment of multiple anomaly detection algorithms
such as Local Outliner Factor and Isolation Forest algorithm on the PCA transformed Credit Card
Transaction data.

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 CONTENTS

Chapter Topics Page No.

1.1 Idea of Project 8

Chapter 1:
Introduction 1.2 Motivation of project 8

1.3 Brief descriptions 8

2.1 Literature Survey for problem 10

Chapter 2:
Literature Survey identification

3.1 Problem definition and scope. 12

3.2 Project Role 12

Chapter 3:
Scope of Project 3.3 Project plan 12
3.4 Software and hardware requirement/ 13
specification
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3.5 System Architecture
Chapter 4: 15
4.1 Bibliography
References and Bibliography

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 Chapter 1
Introduction

1.1 Idea of Project:

As we are moving towards the digital world – cybersecurity is becoming a crucial part of our life.
When we talk about security in digital life then the main challenge is to find the abnormal
activity.When we make any transaction while purchasing any product online – a good amount of
people prefer credit cards. The credit limit in credit cards sometimes help us making purchases
even if we don’t have the amount at that time but , on the other hand , these features are misused
by cyber attackers. To tackle this problem we need a system that can abort the transaction if it
finds fishy. Here , comes the need for a system that can track the pattern of all the transactions
and if any pattern is abnormal then the transaction should be aborted.
So, in this way we got the idea of this project and later we discussed this idea with our Teachers
and they also gave us the permission to do further activities according to this Idea.

1.2 Motivation of project:

The use of machine learning in fraud detection has been an interesting topic now days. A credit
card frauddetection algorithm consists in identifying thosetransactions with a high probability of
being fraud,based on historical fraud patterns. Machine learning, having three types, from that
also the supervised andhybrid approach is more suitable for fraud detection.

1.3 Brief description:

Credit card fraud is a growing concern with far reaching consequences in the government,
corporate organizations, finance industry, In Today’s world high dependency on internet
technology has enjoyed increased credit card transactions but credit card fraud had also
accelerated as online and offline transaction. As credit card transactions become a widespread
mode of payment, focus has been given to recent computational methodologies to handle the
credit card fraud problem. There are many fraud detection solutions and software which prevent
frauds in businesses such as credit card, retail, e-commerce, insurance, and industries. Machine
Learning is one notable and popular methods used in solving credit fraud detection problem. It is
impossible to be sheer certain about the true intention and rightfulness behind an application or
transaction. In reality, to seek out possible evidences of fraud from the available data using
mathematical algorithms is the best effective option. Fraud detection in credit card is the truly the
process of identifying those transactions that are fraudulent into two classes of legit class and
fraud class transactions, several techniques are designed and implemented to solve to credit card
fraud detection such as genetic algorithm, artificial neural network frequent item set mining,
migrating birds optimization algorithm, comparative analysis of decision tree and random forest is
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carried out. Credit card fraud detection is a very popular but also a difficult problem to solve.
Firstly, due to issue of having only a limited amount of data, credit card makes it challenging to
match a pattern for dataset. Secondly, there can be many entries in dataset with truncations of
fraudsters which also will fit a pattern of legitimate behavior. Also the problem has many
constraints. Firstly, data sets are not easily accessible for public and the results of researches are
often hidden and censored, making the results inaccessible and due to this it is challenging to
benchmarking for the models built. Datasets in previous researches with real data in the literature
is nowhere mentioned. Secondly, the improvement of methods is more difficult by the fact that
the security concern imposes a limitation to exchange of ideas and methods in fraud detection,
and especially in credit card fraud detection. Lastly, the data sets are continuously evolving and
changing making the profiles of normal and fraudulent behaviors always different that is the legit
transaction in the past may be a fraud in present or vice versa. This paper evaluates two advanced
machine learning, Decision tree and random forests and then a collative comparison is made to
evaluate that which model performed best. Credit card transaction datasets are rarely available,
highly imbalanced and skewed. Optimal feature (variables) selection for the models, suitable
metric is most important part of mining to evaluate performance of techniques on skewed credit
card fraud data. A number of challenges are associated with credit card detection, namely
fraudulent behavior profile is dynamic, that is fraudulent transactions tend to look like legitimate
ones, Credit card fraud detection performance is greatly affected by type of sampling approach
used, selection of variables and detection technique used.

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 Chapter 2
Literature Survey

2.1 Literature Survey for problem identification

In this section, we briefly review the related work on credit card fraud system and their different
techniques. In this document proposes a new comparative measure of the comparison rules that
reasonably represents the profits and losses due to fraud detection. A cost-sensitive method based
on the minimum Bayes risk is presented using the proposed cost measure. Improvements of up to
23% are obtained by comparing this method and other latest-generation algorithms. The data set
for this document is based on the real-life transactional data of a large European company and
personal data in the data is kept confidential. The accuracy of an algorithm is about 50%. The
importance of this work was to find an algorithm and reduce the cost measurement. The result
was 23% and the algorithm they found was the minimal risk of Bayes. In Several modern
techniques based on sequence alignment, machine learning, artificial intelligence, genetic
programming, data mining, etc. They have been developed and are still being developed to detect
fraudulent credit card transactions. A solid and clear understanding of all these approaches is
needed, which will undoubtedly lead to an efficient credit card fraud detection system. This
document shows a survey of different techniques used in credit card fraud detection mechanisms
and the evaluation of each methodology based on certain design criteria. An analysis of credit
card fraud detection methods was performed. The survey in this document was based solely on
detecting the efficiency and transparency of each method. The importance of this document was
to conduct a survey to compare different credit card fraud detection algorithms to find the most
appropriate algorithm to solve the problem. In A comparison was made between models based on
artificial intelligence together with a general description of the fraud detection system developed
in this document, such as the naive Bayesian classifier and the Bayesian network model, the
clustering model. And finally, conclusions are drawn on the results of the model evaluation tests.
The number of legal truncation was determined to be greater than or equal to 0.65, ie its accuracy
was 65% using the Bayesian network. The importance of this document is to compare the models
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based on artificial intelligence together with a general description of the developed system and to
establish the accuracy of each model together with the recommendation to create the best model.
In Nutan and Suman on review on credit card fraud detection they have supported the theory of
what is credit card fraud, types of fraud like telecommunication, bankruptcy fraud etc. and how to
detect it, in addition to it they have explained numerous algorithms and methods on how to detect
fraud using Glass Algorithm, Bayesian, networks, Hidden Markova model, Decision Tree and 4
more. They have explained in detail about each algorithm and how this algorithm works along
with mathematical explanation. Types of machine learning along with classifications has been
studied. Pros and cons of each method is listed

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 Chapter 3
Scope of project

3.1 Problem definition & scope

In this system evidences from current as well as past Behaviour are combined. A fraud detection
system is proposed that includes rule based filter, Dempster Shafer adder, transaction history
database and Bayesian learner. In rule base the suspicion level of each incoming transaction is
determined. Dumpster Shafer is used to combine multiple such evidences and an initial belief is
computed. Based on this belief the transactions are classified as normal, abnormal or suspicious.
The incoming transactions are initially handled by the rule base using probability values. After
this the values are combined using Dumpster Shafer Adder. If the transaction is declared as
fraudulent then it is handled by the card holder. If suppose the transaction is suspicious then it is
fed in the suspicious table. The score of transaction is updated in the database with the help of
machine learning classification. This architecture is flexible such that new kinds of fraud can be
handled easily. With the help of learner the system can dynamically adapt to the changing needs.

3.2 Project Role

To build credit card fraud detection system using machine learning algorithms. The major aim of
this project is to perform a comprehensive review of different fraud detection methods and some
innovative machine learning technique.

3.3 Project plan

S.r. no. Duration Tasks
1. 15-September-2021 To 25-September-2021 Selection of domain
2. 29-September-2021 To 06-October-2021 Topic selection
3. 07- October -2021 To 23- October -2021 Base paper selection.
4. 25- October -2021 To 30- October -2021 Existing System.

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 5. 03-November-2021 To 17- November -2021 Requirement collection from Industry
6. 25- November -2021 To 15-December-2021 Project proposal plan.
7. 1st week of January Presentation on project Plan.
8. 14-February-2022 To 21- February -2022 Module design.
9 22- February -2022 To 01-March-2022 GUI .
10 02- March -2022 To 30- March -2022 Implementation.
11 01-April-2022 To 11-April-2022 Testing.
12 15-April-2022 To 30-April-2022 Installation of application
13 Last week of may Final project presentation

3.4 Software and Hardware Specifications

Software Specifications :

Sr. No. Resource Configuration

1. Operating System Windows 8.1 pro

2. Coding Language Python

3. Software Python

Hardware
Specifications :

Sr.No Resource Configuration

1 Processor Intel® Pentium® CPU B960

2 Speed 2.20 GHz

3 RAM 4 GB

5 Key Board Standard Windows Keyboard

6 Mouse Two or Three Button Mouse

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3.5 Sytsem Architecture

Conclusion:-

Credit card fraud detection is a fascinating domain. From this survey, we analyze that machine
learning is the best compared to forecasting and classification. Machine learning techniques are
mainly preferred in fraud detection, due to their high accuracy and detection rate. Even so,
researchers find it difficult to achieve greater accuracy and detection speed. In addition,
organizations are interested in finding ways to reduce costs and increase profits; you can find and
select the method of previous studies.

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 Chapter 4
Bibliography

REFERENCES

[1] Jain R., Gour B., Dubey S., A hybrid approach for credit card fraud detection using rough set
and decision tree technique, International Journal of Computer Applications 139(10) (2016).

[2] Dermala N., Agrawal A.N., Credit card fraud detection using SVM and Reduction of false
alarms, International Journal of Innovations in Engineering and Technology (IJIET) 7(2) (2016).

[3] Phua C., Lee V., Smith, Gayler K.R., A comprehensive survey of data mining-based fraud
detection research. arXiv preprint arXiv:1009.6119 (2010).

[4] Bahnsen A.C., Stojanovic A., Aouada D., Ottersten B., Cost sensitive credit card fraud
detection using Bayes minimum risk. 12th International Conference on Machine Learning and
Applications (ICMLA) (2013), 333-338.

[5] Carneiro E.M., Dias L.A.V., Da Cunha A.M., Mialaret L.F.S., Cluster analysis and artificial
neural networks: A case study in credit card fraud detection, 12th International Conference on
Information Technology-New Generations (2015), 122-126.

[6] Hafiz K.T., Aghili S., Zavarsky P., The use of predictive analytics technology to detect credit
card fraud in Canada, 11th Iberian Conference on Information Systems and Technologies (CISTI)
(2016), 1-6.

[7] Sonepat H.C.E., Bansal M., Survey Paper on Credit Card Fraud Detection, International
Journal of Advanced Research in Computer Engineering & Technology 3(3)
(2014).VarrePerantalu K., BhargavKiran, Credit card Fraud Detection using Predictive Modeling
(2014).

[8] Stolfo S., Fan D.W., Lee W., Prodromidis A., Chan P., Credit card fraud detection using meta-
learning: Issues and initial results, AAAI-97 Workshop on Fraud Detection and Risk Management
(1997).

[9] Maes S., Tuyls K., Vanschoenwinkel B., Manderick, B., Credit card fraud detection using
Bayesian and neural networks, International Journal of Pure and Applied Mathematics Special
Issue 836Proceedings of the 1st international naiso congress on neuro fuzzy technologies (2002),
261-270.

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[10] Chan P.K., Stolfo S.J., Toward Scalable Learning with Non- Uniform Class and Cost
Distributions: A Case Study in Credit Card Fraud Detection, In KDD (1998), 164-168.

Appendix – B

Name of Program :COMPUTER ENGINEERING Semester : CO – 5 – I

Course Title :Capstone Project Planning Course Code : 22058
Title of Capstone Project : Credit Card Fraud Detection

A.POs addressed by the Capstone Project:

A] Discipline knowledge
B] Engineering Tools
C] The engineer and society
D] Ethics

B. COs addressed by the Capstone Project:

C22058.a: Write the problem/task specification in existing system related to the occupation.
C22058.b: Select, Collect and use required information/knowledge to solve the problem/complete the task.
C22058.c: Logically choose relevant possible solution.
C22058.d: Consider the ethical issues related to project.
C22058.e: Assess the impact of the project on society.
C22058.f: Prepare project proposal with action plan and time duration scientifically before beginning of
project
C22058.f: Communicate effectively and confidently as a member and leader of team.

C. Other Learning Outcomes achieved through this project:

1Unit Outcomes (Cognitive Domain)

I. Problem identification and specification
II. Industrial survey and literature review
2 Practical Outcomes (in Psychomotor Domain)
I. Collect relevant from sources
II. Exprtise technology required for fabrication.
3 Affective Domain Outcomes
a. Demonstrate working as a leader/a team member.
b. Maintain tools and equipment.
c. Follow ethical practices.

PROGRESSIVE ASSESSMENT (PA) Sheet

Sr. No. Criteria Max Mark Marks Obtained
1 Problem Identification / Project Title
2 Industrial Survey and Literature Review
10
3 Punctuality and overall contribution
4 Project Diary
5 Report writing including documentation 10
6 Presentation 05
Total 25

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Name and Sign of Project guide Signature of coordinator

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