Credit Card Fraud Detection

Using Machine Learning

• Introduction
• Why this Topic?
• Dataset and its Types.
• System Architecture.
• Challenges in Credit Card Fraud Detection 
• System Description
• Conclusion
• BIBLIOGRAPHY
 Introduction
• Credit card generally refers to a card that is assigned to the customer
(cardholder), usually allowing them to purchase goods and services within
the credit limit or withdraw cash in advance.
• Fraud in credit card transactions is the unbidden use of someone’s account
without the owner being aware of it. Credit card frauds are easy targets.
• Fraudsters always try to make every fraudulent transaction legitimate,
which makes fraud detection a very challenging and difficult task to
detect.
• There are many machine learning techniques to overcome this problem.
• Our project aims to prevent such fraudulent practices by analyzing and
studying these fraud transactions to avoid similar situations in the
upcoming transactions.
 Why this Topic?
• Generate more sales with good customers: The main purpose of fraud detection technology
is to detect bad customers. What’s less obvious is how you can use the technology to do more
sales with the good customers once you know who they are?You can use the data collected
through the fraud detection process to understand your customers better – find out what their
average cart value is, how often they shop with you, and the kinds of items they buy. So you
can sell more often and with higher-dollar transactions to good customers.
• Increase authorization rates: An authorization rate, also known as an approval ratio or rate,
is the percent of transactions that are approved through the authorization process. When you
submit a transaction for authorization, the cardholder’s issuing bank reviews the transaction
and either approves or denies the request.
• Reduce reserve account requirements: A merchant account reserve is money your acquiring
bank or processor sets aside in case of emergencies. It’s similar to a security deposit for an
apartment rental or collateral for a loan.If you have a merchant account reserve, it’s probably
because your payment processor thinks you’re risky.But if you keep fraud risks down and
reduce chargebacks, you can prove to the payment processor that you aren’t as risky as they
assumed. And they might ease up on reserve requirements — thus, more revenue in your
pocket.
 What is Dataset and Types of Data present in
Dataset?
• A Dataset is a set or collection of data. This set is normally presented in a tabular
pattern. Every column describes a particular variable. And each row corresponds to a
given member of the data set, as per the given question. This is a part of data
management. Data sets describe values for each variable for unknown quantities such
as height, weight, temperature, volume, etc., of an object or values of random
numbers.
Types of Data
• Structured Data: The data which is to the point, factual, and highly organized is
referred to as structured data. It is quantitative in nature, i.e., it is related to quantities
that means it contains measurable numerical values like numbers, dates, and times.
• Unstructured Data: All the unstructured files, log files, audio files, and image files
are included in the unstructured data. Some organizations have much data available,
but they did not know how to derive data value since the data is raw.
 SYSTEM ARCHITECTURE

• This is a block diagram for our system. It is

the actual representation of the algorithm
which we implemented. The first step is to
read the data set and then it is sent for
sampling. Training and testing of the data set
is done.
 Cont……
• After the feature selection, the data will be sent to the
algorithm which is the combination of the logistic
regression, decision tree, random forest & MCC. The
resultant data is stored in test sample data. The prediction
of outcome is done Based on test sample data & the
result of the combined algorithm. Later the performance
& accuracy results are plotted. It has a feature which
validates the results if the transaction is legitimate then
the transaction is said to be true or else it is false. In case
of false transactions the bank is made aware of it.
 Challenges in Credit Card Fraud Detection 

• The challenges involved in credit card fraud detection project is primarily

the data itself. The data is heavily imbalanced, i.e., the count of data
labeled as fraudulent is way less than the data labeled as non-fraudulent
data. This makes it extremely tricky to train the model as it tends to
overfit for the majority class and underfit for the minority class.
Techniques like oversampling, undersampling, cost-sensitive learning,
etc. can be used to deal with this. The metrics used for the final model are
different from standard evaluation metrics of accuracy, AUC-ROC, etc.
• Another prevalent faced challenge is the quality and quantity of the data.
The startups in the early stage do not have much user history data to train
extensive models, which makes it difficult to train a robust fraud
detection model. A temporary solution to this problem can be sourcing
data from an external third party, like scores from credit bureaus. 
 SYSTEM DISCRIPTION:

HARDWARE AND SOFTWARE REQUIREMENTS: -

• The implementation requirements are given in this section.
Software :
1. Operating system : Windows 8/10.
2. IDE Tool : Visual Studios and Python Colaboratry notebook
3. Coding Language : Python 3.6 & up
4. APIs : Numpy, pandas, Matplotlib,imblearn
Hardware :
1. Processor : Pentium i3 or higher.
2. RAM : 4 GB or higher.
 Conclusion
• Credit card fraud is an act of criminal dishonesty. This
paper has various machine learning algorithms. All
these techniques are tested based on accuracy and
precision. We have selected supervised learning
technique Random Forest to classify the alert as
fraudulent or authorized. This classifier will be trained
using feedback and delayed supervised samples. Next
it will aggregate each probability to detect alerts.
Further we proposed a learning to rank approach
where alerts will be ranked based on priority.
 BIBLIOGRAPHY

[1] Vaishnavi Nath Dornadulaa, Geetha S. Credit Card

Fraud Detection using Machine Learning Algorithms.
IJCSMC, 2019,
https://www.sciencedirect.com/science/article/pii/S1877
050 92030065X.
[2] Lakshmi S V S S, Selvani Deepthi Kavila, (2018),
Machine Learning For Credit Card Fraud Detection
System, Research India Publications
[3]
https://www.kaggle.com/ntnu-testimon/paysim1/home
Thank You