Cybersecurity and Fraud Detection in Financial Transactions

Abstract

AbstractFrauds in financial services are an ever-increasing phenomenon, and cybercrime generates multimillion revenues, therefore even a small improvement in fraud detection rates would generate significant savings. This chapter arises from the need to overcome the limitations of the rule-based systems to block potentially fraudulent transactions. After mentioning the limitations of rule-based approach, this chapter explains how machine learning is able to address many of these limitations and, more effectively, identify risky transactions. A novel AI-based fraud detection system – built over a Data Science and Machine Learning – is presented for the pre-processing of transaction data and model training in a batch layer (to periodically retrain the predictive model with new data) while in a stream layer, the real-time fraud detection is handled based on new input transaction data. The architecture presented makes this solution a valuable tool for supporting fraud analysts and for automating the fraud detection processes.