SPD Group Blog

I would like to share this guide on Credit Card Detection using Machine Learning technology. What do you think about it? I want to get you reaction. Can you suggest me any books on this subject? I would love to learn more about it. 

What is credit card fraud detection?

“Fraud detection is a set of activities undertaken to prevent money or property from being obtained through false pretenses.”

Fraud can be committed in a number of different ways and in a number of different settings. For example, fraud can be committed in the banking, insurance, government, and healthcare sectors.

Most fraud detection solutions combine a range of data components to form a connected view of both genuine and fraudulent payments to decide on the likelihood of a transaction being fraudulent. Increasingly, this view should consider IP address, geolocation, device identification, “BIN” data, global latitude/longitude, historic transaction patterns, and the actual transaction information. In practice, this means that merchants and issuers deploy analytically-based responses that use internal and external data to apply a set of business rules or analytical algorithms to detect fraud.  Leading organizations are using machine learning and moving away from business rules to improve fraud detection and reduce customer friction.

Credit Card Fraud Detection with Machine Learning is a process of data samples (fraudulent and normal transactions provided by the customer) investigation by the Data Science team and development of a model that will show the best results in revealing and preventing abnormal transactions. This is achieved through bringing all meaningful features of card users’ together, such as Date, User Zone, Product Category, Amount, Provider, Client’s behavioral patterns, etc. and run through a subtly trained model that finds patterns and rules so that it can classify a transaction as following: fraudulent or not.

How does credit card fraud happen?

Credit card frauds can happen due to various reasons, caused either by card owner’s negligence with his data, either by the breach in a website’s security. Here are some of them:

• consumer reveals his credit card number to unfamiliar individuals;
• a card is lost or stolen and someone else uses it;
• when mail is stolen from the recipient and received by criminals
• business employees copy cards or card numbers of its owner;
• making a counterfeit credit card.

When your card is lost or stolen an unauthorized charge can happen, so that the person who finds it, uses it for a purchase. Criminals can also forge your name and use the card, or order some goods through a mobile phone or on the Internet. Also, there is a counterfeit credit card – fake cards that have real account information that was sneaked from holders. That is especially dangerous whereas the victims have their real cards, but do not know someone already copied their card. Such cards look absolutely valid, having the logos and encoded magnetic strips of the original one. Counterfeit cards are usually eliminated by the criminals after several successful payments, just before a victim can report the misuse.

Who is liable for data fraud?

Personal information theft is dangerous because, although not being liable for the losses, the victim may spend a few years to deal with all financial and credit problems done by criminals.

Credit Card Fraud types

Online Credit card Fraud types can be identified as the following:

• unauthorized card charge;
• counterfeit cards;
• identity theft;
• skimming;
• fishing.

Apart from unauthorized card charges and counterfeit credit cards there also such types of fraudulent activities as identity theft, skimming, and fishing.

When an individual’s personal information, such as Social Security number or the secret question answer, date of birth is stolen by criminals, they can use this information to commit financial operations. A criminal can open new credit accounts or access the current credit and bank account, using a person’s name or information.

Credit card skimming means making an illegal copy of a credit or bank card with a device that reads and duplicates information from the original card. Fraudsters use machines named “skimmers” to extract card numbers and other credit card information, save it and resell to criminals.

Cardholders can be reached by their E-mail while someone sends the deceptive letters to users. The messages look pretty legitimate (very similar bank URLs and trustworthy logos) as if sent by the bank. In reality, such a message can be meant to steal the person’s information, bank account numbers and online passwords. If you follow the wrong link or provide valuable information in response to this message on a fake bank website – in a couple of hours your bank account will be drained by the criminals, while an electronic transfer of expenses is made to the account they hold.

Explore more here: https://spd.group/machine-learning/credit-card-fraud-detection/