Banking

Improving Credit Card Fraud Detection Using a Meta-Classification Strategy

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Executive Summary

One of the issues facing credit card fraud detection systems is that a significant percentage of transactions labeled as fraudulent are in fact legitimate. These "False alarms" delay the detection of fraudulent transactions and can cause unnecessary concerns for customers. In this paper, over 1 million unique credit card transactions from 11 months of data from a large Canadian bank were analyzed. A meta-classifier model was applied to the transactions after being analyzed by the Bank's existing neural network based fraud detection algorithm. This meta-classifier model consists of 3 base classifiers constructed using the decision tree, na?ve Bayesian, and k-nearest neighbor algorithms.

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