Credit Card Fraud Detection under Extreme Imbalanced Data: A Comparative Study of Data-level Algorithms

ABSTRACT Credit card fraud is one of the biggest cybercrimes faced by users. Intelligent machine learning based fraudulent transaction detection systems are very effective in real-world scenarios. However, while designing these systems, machine learning approaches suffer from the problem of imbalanced data, i.e. imbalanced class distribution. Therefore, balancing the dataset becomes an imperative sub-task. Investigation of state-of-the-art approaches reveals that there is a need for a systematic study of class imbalance handling strategies to design an intelligent and capable system to detect the fraudulent transaction. This work aims to provide a comparative study of different class imbalance handling methods. To compare the effectiveness and efficiency of different class imbalance approaches in conjunction with state-of-the-art classification approaches, we have performed an extensive experimental study. We compared these methods on many performance indicators such as Precision, Recall, K-fold Cross-validation, AUC-ROC curve and execution time. In this study, we found that the Oversampling followed by Undersampling methods performs well for ensemble classification models such as AdaBoost, XGBoost and Random Forest.