CREDITCARDFRAUDDETECTI

ONUSING
ADABOOSTANDMAJORITYVOTI
NG

ABSTRACT:
Cr
edi
tcar
dfr
audi
saser
iouspr
obl
em i
nfi
nanci
alser
vices.
Bi
l
li
onsofdol
l
arsar
elostduet
ocr
edi
tcar
dfr
audev
eryy
ear
.
Ther
eisal
ackofr
esear
chst
udi
esonanal
yzi
ngr
eal
-wor
ldcr
edi
t
car
ddat
aowi
ngt
oconf
ident
ial
i
tyi
ssues.I
nthi
spaper
,machi
ne
l
ear
ningal
gor
it
hmsar
eusedt
odet
ectcr
edi
tcar
dfr
aud.St
andar
d
model
s ar
efi
rst
ly used.Then,hy
bri
d met
hods whi
ch use
AdaBoostandmaj
ori
tyv
oti
ngmet
hodsar
eappl
i
ed.Toev
aluat
e
t
hemodel
eff
icacy
,apubl
i
clyav
ail
abl
ecr
edi
tcar
ddat
aseti
sused.
Then,ar
eal
-wor
ldcr
edi
tcar
ddat
asetf
rom af
inanci
ali
nst
it
uti
on
i
sanal
yzed.I
naddi
ti
on,noi
sei
saddedt
othedat
asampl
est
o
f
urt
her assess t
he r
obust
ness of t
he al
gor
it
hms. The
ex
per
iment
alr
esul
tsposi
ti
vel
yindi
cat
ethatt
hemaj
ori
tyv
oti
ng
met
hodachi
evesgoodaccur
acyr
atesi
ndet
ect
ingf
raudcasesi
n
cr
edi
tcar
ds.
Inav
oidi
ngl
ossf
rom f
raud,
twomechani
smscanbe
used:f
raudpr
event
ionandf
rauddet
ect
ion.Fr
audpr
event
ioni
sa
pr
oact
ivemet
hod,
wher
eitst
opsf
raudf
rom happeni
ngi
nthef
ir
st
pl
ace.On t
he ot
herhand,f
raud det
ect
ion i
sneeded when a
f
raudul
entt
ransact
ioni
sat
tempt
edbyaf
raudst
er.
ARCHI
TECTURE:

EXI
STI
NGSYSTEM:
Wi
tht
her
iseofe-
commer
cei
nthepastdecade,t
heuseof
cr
edi
tcar
dshasi
ncr
easeddr
amat
ical
l
y.Thenumberofcr
edi
t
car
dtr
ansact
ionsi
n2011i
nMal
aysi
awasatabout320mi
l
li
on,
andi
ncr
easedi
n2015t
oabout360mi
l
li
on.Al
ongwi
tht
her
iseof
cr
edi
tcar
dusage,
thenumberoff
raudcaseshasbeenconst
ant
ly
i
ncr
eased.Whi
l
enumer
ousaut
hor
izat
iont
echni
queshav
ebeeni
n
pl
ace,cr
edi
tcar
dfr
aud cases hav
e nothi
nder
ed ef
fect
ivel
y.
Fr
audst
ersf
avort
hei
nter
netast
hei
rident
it
yandl
ocat
ionar
e
hi
dden.Ther
isei
ncr
edi
tcar
dfr
audhasabi
gimpactont
he
f
inanci
ali
ndust
ry.Thegl
obalcr
edi
tcar
dfr
audi
n2015r
eachedt
o
ast
agger
ing USD $21.
84 bi
l
li
on.Lossf
rom cr
edi
tcar
dfr
aud
af
fect
sthemer
chant
s,wher
etheybearal
lcost
s,i
ncl
udi
ngcar
d
i
ssuerf
ees,char
ges,and admi
nist
rat
ive char
ges.Si
nce t
he
mer
chant
sneedt
obeart
hel
oss,somegoodsar
epr
icedhi
gher
,
or di
scount
s and i
ncent
ives ar
ereduced.Ther
efor
e,i
tis
i
mper
ati
vet
oreducet
hel
oss,andanef
fect
ivef
rauddet
ect
ion
sy
stem t
oreduceorel
i
minat
efr
audcasesi
simpor
tant
.Ther
e
hav
ebeenv
ari
ousst
udi
esoncr
edi
tcar
dfr
auddet
ect
ion.Machi
ne
l
ear
ningandr
elat
edmet
hodsar
emostcommonl
yused,whi
ch
i
ncl
ude ar
ti
fi
cialneur
alnet
wor
ks,r
ule-
induct
ion t
echni
ques,
deci
siont
rees,l
ogi
sti
cregr
essi
on,andsuppor
tvect
ormachi
nes.
These met
hods ar
e used ei
therst
andal
one orbycombi
ning
sev
eral
met
hodst
oget
hert
ofor
m hy
bri
dmodel
s.

PROPOSEDSYSTEM:
I
nthi
spaper
,at
otaloft
wel
vemachi
nel
ear
ningal
gor
it
hms
ar
eusedf
ordet
ect
ingcr
edi
tcar
dfr
aud.Theal
gor
it
hmsr
ange
f
rom st
andar
dneur
alnet
wor
kst
odeepl
ear
ningmodel
s.Theyar
e
ev
aluat
edusi
ngbot
hbenchmar
kandr
eal
-wor
ldcr
edi
tcar
ddat
a
set
s.I
naddi
ti
on,t
heAdaBoostandmaj
ori
tyv
oti
ngmet
hodsar
e
appl
i
ed f
orf
ormi
ng hy
bri
d model
s.To f
urt
herev
aluat
ethe
r
obust
nessandr
eli
abi
l
ityoft
hemodel
s,noi
sei
saddedt
other
eal
-
wor
ld dat
a set
.The key cont
ri
but
ion oft
his paperi
sthe
ev
aluat
ionofav
ari
etyofmachi
nel
ear
ningmodel
swi
thar
eal
-
wor
ld cr
edi
tcar
d dat
a setf
orf
raud det
ect
ion.Whi
l
e ot
her
r
esear
cher
shav
eusedv
ari
ousmet
hodsonpubl
i
clyav
ail
abl
edat
a
set
s,t
hedat
aset
susedi
nthi
spaperar
eext
ract
edf
rom act
ual
cr
edi
tcar
dtr
ansact
ioni
nfor
mat
ionov
ert
hreemont
hs.

ALGORI
THM:
NAI
VEBAYESALGORI
THM
Acl
ass'
spr
iormaybecal
cul
atedbyassumi
ngequi
probabl
e
cl
asses(
i.
e.,
pri
ors=1/(
numberofcl
asses)
),orbycal
cul
ati
ngan
est
imat
efort
hecl
asspr
obabi
l
ityf
rom t
het
rai
ningset(
i.
e.,(
pri
or
f
oragi
vencl
ass)=(
numberofsampl
esi
nthecl
ass)/(
tot
al
numberofsampl
es)
).Toest
imat
ethepar
amet
ersf
oraf
eat
ure'
s
di
str
ibut
ion,one must assume a di
str
ibut
ion or gener
ate
nonpar
amet
ri
cmodel
sfort
hef
eat
uresf
rom t
het
rai
ningset
.[
8]
Theassumpt
ionsondi
str
ibut
ionsoff
eat
uresar
ecal
l
edt
heev
ent
modeloft
heNai
veBay
escl
assi
fi
er.Fordi
scr
etef
eat
uresl
i
ket
he
ones encount
ered i
n documentcl
assi
fi
cat
ion (
incl
ude spam
f
il
ter
ing)
,mul
ti
nomi
aland Ber
noul
l
idi
str
ibut
ions ar
e popul
ar.
Theseassumpt
ionsl
eadt
otwodi
sti
nctmodel
s,whi
char
eof
ten
conf
used.I
tis a cl
assi
fi
cat
ion t
echni
que based on Bay
es’
Theor
em wi
thanassumpt
ionofi
ndependenceamongpr
edi
ctor
s.
I
n si
mpl
eter
ms,a Nai
ve Bay
es cl
assi
fi
erassumes t
hatt
he
pr
esenceofapar
ti
cul
arf
eat
urei
nacl
assi
sunr
elat
edt
othe
pr
esence ofanyot
herf
eat
ure.Forexampl
e,a f
rui
tmaybe
consi
der
edt
obeanappl
eifi
tisr
ed,
round,
andabout3i
nchesi
n
di
amet
er.Ev
eni
fthesef
eat
uresdependoneachot
herorupont
he
ex
ist
ence of t
he ot
her f
eat
ures, al
l of t
hese pr
oper
ti
es
i
ndependent
lycont
ri
but
etot
hepr
obabi
l
ityt
hatt
hisf
rui
tisan
appl
eandt
hati
swhyi
tisknownas‘
Nai
ve’
.Nai
veBay
esmodeli
s
easyt
obui
l
dandpar
ti
cul
arl
yusef
ulf
orv
eryl
argedat
aset
s.Al
ong
wi
thsi
mpl
i
cit
y,Nai
veBay
esi
sknownt
oout
per
for
m ev
enhi
ghl
y
sophi
sti
cat
edcl
assi
fi
cat
ionmet
hods.

MODULES:
1.
PURHASEPHASE
Admi
nupl
oadst
hepr
oduct
sand usercanv
iew t
he
det
ail
s.I
fuserwi
shest
opur
chaset
hedet
ail
sthent
heyhav
e
t
oent
erdet
ail
soft
hei
rownt
opur
chase.Thepay
menti
s
v
eryi
mpor
tantphase,
inor
dert
opr
otectt
hedet
ail
sofuser
s’
cr
edi
tcar
d.Thebasi
cpr
ocessofpur
chasei
sdoneher
e.

2.
CREDI
TCARDSAFETY
 Gener
all
ycr
edi
tcar
dsar
erequi
redt
oent
ert
hedet
ail
sine-
commer
cewebsi
tes.Thecr
edi
tcar
ddet
ail
sar
econt
ainst
he
car
d number
,expi
rydat
e,and v
eri
fi
cat
ion numbert
hrough
t
elephoneorwebsi
tei
sext
remel
ysecr
ecy
.Thecr
edi
tcar
d
det
ail
sar
egi
venasencr
ypt
edf
ormati
nor
dert
omai
ntai
nthe
secr
ecy
.Userhol
dst
hekeyt
oencr
yptordecr
yptdet
ail
sof
cr
edi
tcar
d.

3.
MAJORI
TYVOTI
NGS
Themaj
ori
tyv
oti
ngdoescanbecol
l
ect
edf
rom t
he
cust
omer
’sf
eedback.Fr
om t
he f
eedback naï
ve bay
es
cl
assi
fi
erappl
i
edt
ofi
ndt
heposi
ti
veornegat
iveorabout
whi
chpr
oduct
.Themai
ncl
assi
fi
cat
ionsar
eshownt
oadmi
n
i
nor
dert
obl
ockt
hedet
ail
sofmal
funct
ionedecommer
ce
websi
tes.

4.
PICTORI
ALANALYSI
S
Thi
sist
hepl
acewher
eadmi
nhav
eabi
l
ityt
ocomef
or
par
ti
cul
ar sol
uti
on about pr
oposed sy
stem.The pi
ctor
ial
r
epr
esent
ati
onsofcol
l
ect
eddat
aar
eshowni
nthef
orm of
gr
aphs.The di
ff
erentgr
aphsgi
vet
he bestanal
ysi
soft
he
sy
stem.
FUTUREWORK:
Forf
utur
ewor
k,t
hemet
hodsst
udi
edi
nthi
spaperwi
l
lbe
ex
tended t
o onl
i
ne l
ear
ning model
s.I
n addi
ti
on,ot
heronl
i
ne
l
ear
ningmodel
swi
l
lbei
nvest
igat
ed.Theuseofonl
i
nel
ear
ning
wi
l
lenabl
erapi
ddet
ect
ionoff
raudcases,pot
ent
ial
l
yinr
eal
-t
ime.
Thi
sint
urnwi
l
lhel
pdet
ectandpr
eventf
raudul
entt
ransact
ions
bef
oret
heyt
akepl
ace,whi
chwi
l
lreducet
henumberofl
osses
i
ncur
redev
erydayi
nthef
inanci
alsect
or.

CONCLUSI
ON:
A st
udy on cr
edi
tcar
dfr
aud det
ect
ion usi
ng machi
ne
l
ear
ningal
gor
it
hmshasbeenpr
esent
edi
nthi
spaper
.Anumberof
st
andar
dmodel
swhi
chi
ncl
udeNB,SVM,andDLhav
ebeenused
i
ntheempi
ri
calev
aluat
ion.Apubl
i
clyav
ail
abl
ecr
edi
tcar
ddat
a
sethas been used f
orev
aluat
ion usi
ng i
ndi
vi
dual(
standar
d)
model
sandhy
bri
dmodel
susi
ngAdaBoostandmaj
ori
tyv
oti
ng
combi
nat
ionmet
hods.TheMCCmet
ri
chasbeenadopt
edasa
per
for
mancemeasur
e;asi
ttakesi
ntoaccountt
het
rueandf
alse
posi
ti
veandnegat
ivepr
edi
ctedout
comes.ThebestMCCscor
eis
0.
823,achi
evedusi
ngmaj
ori
tyv
oti
ng.Ar
ealcr
edi
tcar
ddat
aset
f
rom af
inanci
ali
nst
it
uti
onhasal
sobeenusedf
orev
aluat
ion.The
same i
ndi
vi
dualand hy
bri
d model
s hav
e been empl
oyed.A
per
fectMCCscor
eof1hasbeenachi
evedusi
ngAdaBoostand
maj
ori
tyv
oti
ngmet
hods.Tof
urt
herev
aluat
ethehy
bri
dmodel
s,
noi
sef
rom 10% t
o30% hasbeenaddedi
ntot
hedat
asampl
es.
Themaj
ori
tyv
oti
ngmet
hodhasy
iel
dedt
hebestMCCscor
eof
0.
942f
or30% noi
seaddedt
othedat
aset
.Thi
sshowst
hatt
he
maj
ori
tyv
oti
ngmet
hodi
sst
abl
einper
for
mancei
nthepr
esence
ofnoi
se.