Machine learning and data mining techniques have been used extensively in order to detect credit card frauds. However, most studies consider credit card transactions as isolated events and not as a sequence of transactions. In this framework, we model a sequence of credit card transactions from three different perspectives, namely (i) The sequence contains or doesn't contain a fraud (ii) The sequence is obtained by fixing the card-holder or the payment terminal (iii) It is a sequence of spent amount or of elapsed time between the current and previous transactions. Combinations of the three binary perspectives give eight sets of sequences from the (training) set of transactions. Each one of these sequences is modelled with a Hidden Markov Model (HMM). Each HMM associates a likelihood to a transaction given its sequence of previous transactions. These likelihoods are used as additional features in a Random Forest classifier for fraud detection. Our multiple perspectives HMM-based approach offers automated feature engineering to model temporal correlations so as to improve the effectiveness of the classification task and allows for an increase in the detection of fraudulent transactions when combined with the state of the art expert based feature engineering strategy for credit card fraud detection. In extension to previous works, we show that this approach goes beyond ecommerce transactions and provides a robust feature engineering over different datasets, hyperparameters and classifiers. Moreover, we compare strategies to deal with structural missing values.
Machine learning and data mining techniques have been used extensively in order to detect credit card frauds. However purchase behaviour and fraudster strategies may change over time. This phenomenon is named dataset shift or concept drift in the domain of fraud detection. In this paper, we present a method to quantify day-by-day the dataset shift in our face-to-face credit card transactions dataset (card holder located in the shop) . In practice, we classify the days against each other and measure the efficiency of the classification. The more efficient the classification, the more different the buying behaviour between two days, and vice versa. Therefore, we obtain a distance matrix characterizing the dataset shift. After an agglomerative clustering of the distance matrix, we observe that the dataset shift pattern matches the calendar events for this time period (holidays, week-ends, etc). We then incorporate this dataset shift knowledge in the credit card fraud detection task as a new feature. This leads to a small improvement of the detection.
Payment card fraud causes multibillion dollar losses for banks and merchants worldwide, often fueling complex criminal activities. To address this, many real-time fraud detection systems use tree-based models, demanding complex feature engineering systems to efficiently enrich transactions with historical data while complying with millisecond-level latencies. In this work, we do not require those expensive features by using recurrent neural networks and treating payments as an interleaved sequence, where the history of each card is an unbounded, irregular sub-sequence. We present a complete RNN framework to detect fraud in real-time, proposing an efficient ML pipeline from preprocessing to deployment. We show that these feature-free, multi-sequence RNNs outperform state-of-the-art models saving millions of dollars in fraud detection and using fewer computational resources.
Credit card fraud detection is a very challenging problem because of the specific nature of transaction data and the labeling process. The transaction data is peculiar because they are obtained in a streaming fashion, they are strongly imbalanced and prone to non-stationarity. The labeling is the outcome of an active learning process, as every day human investigators contact only a small number of cardholders (associated to the riskiest transactions) and obtain the class (fraud or genuine) of the related transactions. An adequate selection of the set of cardholders is therefore crucial for an efficient fraud detection process. In this paper, we present a number of active learning strategies and we investigate their fraud detection accuracies. We compare different criteria (supervised, semi-supervised and unsupervised) to query unlabeled transactions. Finally, we highlight the existence of an exploitation/exploration trade-off for active learning in the context of fraud detection, which has so far been overlooked in the literature.
Fraud is a billion-dollar business and expands rapidly year by year. Thousands of people fall victim to it. Fraud always includes a false statement, misinterpretation, or deceitful conduct. Common varieties of fraud offenses include identity theft, insurance fraud, credit/debit card fraud, and mail fraud. The PwC global economic crime survey of 2018 (PwC, 2018) found that about half of the 7,200 surveyed enterprises had already experienced fraud of some kind. This is an increase compared to the PwC survey conducted in 2016 (PwC, 2016), in which slightly more than a third of organizations surveyed had experienced economic crime.