Approaches to Fraud Detection on Credit Card Transactions Using Artificial Intelligence Methods

TL;DR

This paper reviews state-of-the-art artificial intelligence and machine learning techniques for credit card fraud detection, addressing challenges like data imbalance, real-time processing, and feature engineering.

Contribution

It categorizes common problems in fraud detection research and summarizes general solutions and approaches used in recent AI-based methods.

Findings

Imbalanced datasets are a major challenge in fraud detection.

Feature engineering is crucial due to limited industry data.

Real-time detection requires efficient algorithms.

Abstract

Credit card fraud is an ongoing problem for almost all industries in the world, and it raises millions of dollars to the global economy each year. Therefore, there is a number of research either completed or proceeding in order to detect these kinds of frauds in the industry. These researches generally use rule-based or novel artificial intelligence approaches to find eligible solutions. The ultimate goal of this paper is to summarize state-of-the-art approaches to fraud detection using artificial intelligence and machine learning techniques. While summarizing, we will categorize the common problems such as imbalanced dataset, real time working scenarios, and feature engineering challenges that almost all research works encounter, and identify general approaches to solve them. The imbalanced dataset problem occurs because the number of legitimate transactions is much higher than the fraudulent ones whereas applying the right feature engineering is substantial as the features obtained from the industries are limited, and applying feature engineering methods and reforming the dataset is crucial. Also, adapting the detection system to real time scenarios is a challenge since the number of credit card transactions in a limited time period is very high. In addition, we will discuss how evaluation metrics and machine learning methods differentiate among each research.