Study of Hidden Markov Model in credit card fraudulent detection

Abstract

The most accepted payment mode is credit card for both online and offline in today's world, it provides cashless shopping at every shop in all countries. It will be the most convenient way to do online shopping, paying bills etc. Hence, risks of fraud transaction using credit card has also been increasing. In the existing credit card fraud detection business processing system, fraudulent transaction will be detected after transaction is done. It is difficult to find out fraudulent and regarding loses will be barred by issuing authorities. Hidden Markov Model is the statistical tools for engineer and scientists to solve various problems. In this paper, it is shown that credit card fraud can be detected using Hidden Markov Model during transactions. Hidden Markov Model helps to obtain a high fraud coverage combined with a low false alarm rate.