A Proposed Model for Card Fraud Detection Based on CatBoost and Deep Neural Network

Abstract

The rapid development of technology has digitized customer payment behavior towards a cashless society. To a certain extent, this has created a feast for miscreants to commit fraud. According to Nilson (2020), global fraud loss is projected to reach over <inline-formula xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> <tex-math notation="LaTeX">$\$ $ </tex-math></inline-formula> 35 billion by 2025. Consequently, the need for a novel method to prevent this menace is undisputed. This research was conducted on the IEEE-CIS Fraud Detection Dataset provided by Vesta Corporation. Based on the logic of labeling for converting the entire account to “Fraud=1” once the credit card has fraud, we navigate the research process towards predicting fraudulent credit cards rather than fraudulent transactions. The key idea behind the proposed model is user separation, in which we divide users into old and new people before applying CatBoost and Deep Neural Network to each category, respectively. In addition, a variety of techniques to improve detection accuracy, namely handling heavily imbalanced datasets, feature transformation, and feature engineering, are also presented in detail in this paper. The experimental results showed that our model performed well, as we obtained AUC scores of 0.97 (CatBoost) and 0.84 (Deep Neural Network).