Which algorithm is best for credit card fraud detection?

The most commonly techniques used fraud detection methods are Naïve Bayes (NB), Support Vector Machines (SVM), K-Nearest Neighbor algorithms (KNN). These techniques can be used alone or in collaboration using ensemble or meta-learning techniques to build classifiers.

What are hidden Markov models used for?

A hidden Markov model (HMM) is a statistical model that can be used to describe the evolution of observable events that depend on internal factors, which are not directly observable.

Can card fraud be traced?

Credit card companies can track where your stolen credit card was last used, in most cases, only once the card is used by the person who took it. The credit card authorization process helps bank’s track this. However, by the time law enforcement arrives, the person may be long gone.

Can a hidden Markov model be used to detect fraud?

In this paper, we model the sequence of operations in credit card transaction processing using a hidden Markov model (HMM) and show how it can be used for the detection of frauds. An HMM is initially trained with the normal behavior of a cardholder.

How is a credit card fraud detection system trained?

An HMM is initially trained with the normal behavior of a cardholder. If an incoming credit card transaction is not accepted by the trained HMM with sufficiently high probability, it is considered to be fraudulent. At the same time, we try to ensure that genuine transactions are not rejected.

How is a Metalearning system used to detect fraud?

A metalearning system for fraud detection was proposed by Stolfo et al.It was trained on frankincense metaclassifi- ers.After that they worked model depended upon the costs to detect the fraud [3]. Gosh and Reilly proposed the neural network for detecting such fraud by the system, it is trained on account transactions. 2.2 Hidden Markov Model

Why is credit card fraud on the rise?

Abstract: Due to a rapid advancement in the electronic commerce technology, the use of credit cards has dramatically increased. As credit card becomes the most popular mode of payment for both online as well as regular purchase, cases of fraud associated with it are also rising.