Detection of Credit Card Fraud Transactions using Machine Learning based Algorithm

Abstract

The rapid growth in E-Commerce industry has lead to an exponential increase in the use of credit cards for online purchases and consequently they has been surge in the fraud related to it .In recent years, For banks has become very difficult for detecting the fraud in credit card system. Machine learning plays a vital role for detecting the credit card fraud in the transactions. For predicting these transactions banks make use of various machine learning methodologies, past data has been collected and new features are been used for enhancing the predictive power. The performance of fraud detecting in credit card transactions is greatly affected by the sampling approach on data-set, selection of variables and detection techniques used. This paper investigates the performance of SVM, decision tree and random forest for credit card fraud detection. Dataset of credit card transactions is collected from kaggle and it contains a total of 2,84,808 credit card transactions of a European bank data set. It considers fraud transactions as the “positive class” and genuine ones as the “negative class” .The data set is highly imbalanced, it has about 0.172% of fraud transactions and the rest are genuine transactions. The author has been done oversampling to balance the data set, which resulted in 60% of fraud transactions and 40% genuine ones. The three techniques are applied for the dataset and work is implemented in R language. The performance of the techniques is evaluated for different variables based on sensitivity, specificity, accuracy and error rate. The result shows of accuracy for SVM, Decision tree and random forest classifier are 90.0, 94.3, 95.5 respectively. The comparative results show that the Random forest performs better than the SVM and decision tree techniques.