Credit Card Fraud Detection Using Hidden Markov Model(2008)

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Abstract:

                Now a day the usage of credit cards has dramatically increased. As credit card becomes the most popular mode of payment for both online as well as regular purchase, cases of fraud associated with it are also rising. In this paper, we model the sequence of operations in credit card transaction processing using a Hidden Markov Model (HMM) and show how it can be used for the detection of frauds. An HMM is initially trained with the normal behavior of a cardholder. If an incoming credit card transaction is not accepted by the trained HMM with sufficiently high probability, it is considered to be fraudulent. At the same time, we try to ensure that genuine transactions are not rejected. We present detailed experimental results to show the effectiveness of our approach and compare it with other techniques available in the literature.

Existing System:

In case of the existing system the fraud is detected after the fraud is done that is, the fraud is detected after the complaint of the card holder. And so the card holder faced a lot of trouble before the investigation finish. And also as all the transaction is maintained in a log, we need to maintain a huge data. And also now a days lot of online purchase are made so we don’t know the person how is using the card online, we just capture the IP address for verification purpose. So there need a help from the cyber crime to investigate the fraud. To avoid the entire above disadvantage we propose the system to detect the fraud in a best and easy way.

Proposed System:                             

 In proposed system, we present a Hidden Markov Model (HMM).Which does not require fraud signatures and yet is able to detect frauds by considering a cardholder’s spending habit. Card transaction processing sequence by the stochastic process of an HMM. The details of items purchased in Individual transactions are usually not known to any Fraud Detection System(FDS)  running at the bank that issues credit cards to the cardholders. Hence, we feel that HMM is an ideal choice for addressing this problem. Another important advantage of the HMM-based approach is a drastic reduction in the number of False Positives transactions identified as malicious by an FDS although they are actually genuine. An FDS runs at a credit card issuing bank. Each incoming transaction is submitted to the FDS for verification. FDS receives the card details and the value of purchase to verify, whether the transaction is genuine or not. The types of goods that are bought in that transaction are not known to the FDS. It tries to find any anomaly in the transaction based on the spending profile of the cardholder, shipping address, and billing address, etc. If the FDS confirms the transaction to be of fraud, it raises an alarm, and the issuing bank declines the transaction.

Advantage

1.      The detection of the fraud use of the card is found much faster that the existing system.

2.      In case of the existing system even the original card holder is also checked for fraud detection. But in this system no need to check the original user as we maintain a log.

3.      The log which is maintained will also be a proof for the bank for the transaction made.

4.      We can find the most accurate detection using this technique.

5.      this reduce the tedious work of an employee in the bank

Modules

  1. New card
  2. Login
  3. Security information
  4. Transaction
  5. Verification

Module Description

New card

In this module, the customer gives there information to enroll a new card. The information is all about there contact details. They can create there own login and password for there future use of the card.

Login

In Login Form module presents site visitors with a form with username and password fields. If the user enters a valid username/password combination they will be granted access to additional resources on website. Which additional resources they will have access to can be configured separately.

Security information

In Security information module it will get the information detail and its store’s in database.  If the card lost then the Security information module form arise. It has a set of question where the user has to answer the correctly to move to the transaction section. It contain informational privacy and informational self-determination are addressed squarely by the invention affording persons and entities a trusted means to user, secure, search, process, and exchange personal and/or confidential information.

Transaction

The method and apparatus for pre-authorizing transactions includes providing a communications device to a vendor and a credit card owner. The credit card owner initiates a credit card transaction by communicating to a credit card number, and storing therein, a distinguishing piece of information that characterizes a specific transaction to be made by an authorized user of the credit card at a later time. The information is accepted as "network data" in the data base only if a correct personal identification code (PIC) is used with the communication. The "network data" will serve to later authorize that specific transaction. The credit card owner or other authorized user can then only make that specific transaction with the credit card. Because the transaction is pre-authorized, the vendor does not need to see or transmit a PIC.

Verification

Verification information is provided with respect to a transaction between an initiating party and a verification-seeking party, the verification information being given by a third, verifying party, based on confidential information in the possession of the initiating party. In verification the process will seeks card number and if the card number is correct the relevant process will be executed. If the number is wrong, mail will be sent to the user saying the card no has been block and he can’t do the further transaction.

Hardware Requirements

•         SYSTEM                    : Pentium IV 2.4 GHz

•         HARD DISK              : 40 GB

•         FLOPPY DRIVE       : 1.44 MB

•         MONITOR                 : 15 VGA colour

•         MOUSE                      : Logitech.

•         RAM                           : 256 MB

Software Requirements

•         Operating system      : Windows XP Professional

•         Front End                    : Asp .Net 2.0.

•         Coding Language     : Visual C# .Net

•         Back-End                     : Sql Server 2000. 

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