Fraud Detection in Credit Cards using Logistic Regression

Abstract

Due to the increasing number of customers as well as the increasing number of companies that use credit cards for ending financial transactions, the number of fraud cases has increased dramatically. Dealing with noisy and imbalanced data, as well as with outliers, has accentuated this problem. In this work, fraud detection using artificial intelligence is proposed. The proposed system uses logistic regression to build the classifier to prevent frauds in credit card transactions. To handle dirty data and to ensure a high degree of detection accuracy, a pre-processing step is used. The pre-processing step uses two novel main methods to clean the data: the mean-based method and the clustering-based method. Compared to two well-known classifiers, the support vector machine classifier and voting classifier, the proposed classifier shows better results in terms of accuracy, sensitivity, and error rate.