A Neural Network Ensemble With Feature Engineering for Improved Credit Card Fraud Detection

Abstract

Recent advancements in electronic commerce and communication systems have significantly increased the use of credit cards for both online and regular transactions. However, there has been a steady rise in fraudulent credit card transactions, costing financial companies huge losses every year. The development of effective fraud detection algorithms is vital in minimizing these losses, but it is challenging because most credit card datasets are highly imbalanced. Also, using conventional machine learning algorithms for credit card fraud detection is inefficient due to their design, which involves a static mapping of the input vector to output vectors. Therefore, they cannot adapt to the dynamic shopping behavior of credit card clients. This paper proposes an efficient approach to detect credit card fraud using a neural network ensemble classifier and a hybrid data resampling method. The ensemble classifier is obtained using a long short-term memory (LSTM) neural network as the base learner in the adaptive boosting (AdaBoost) technique. Meanwhile, the hybrid resampling is achieved using the synthetic minority oversampling technique and edited nearest neighbor (SMOTE-ENN) method. The effectiveness of the proposed method is demonstrated using publicly available real-world credit card transaction datasets. The performance of the proposed approach is benchmarked against the following algorithms: support vector machine (SVM), multilayer perceptron (MLP), decision tree, traditional AdaBoost, and LSTM. The experimental results show that the classifiers performed better when trained with the resampled data, and the proposed LSTM ensemble outperformed the other algorithms by obtaining a sensitivity and specificity of 0.996 and 0.998, respectively.