Online Credit Card Transaction Fraud Detection Using Hidden Markov Model

Abstract

Online transactions through Online cards has more increased. As Online card becomes the most popular mode of payment for both online and offline, cases of fraud associated with it are also rising. In this paper, we model the sequence of operations in Online card transaction processing using a Hidden Markov Model (HMM) and show how it can be used to the detection of frauds. An HMM is initially trained with the normal behavior of a cardholder. If an incoming Online card transaction is not accepted by the trained HMM with sufficiently high probability, it is considered to be fraudulent. At the same time, we will attempt to guarantee that fraud transactions are rejected. We will present detail experimental results to show of our approach and will compare it with other techniques available in the literature
Keywords: Internet; online shopping; credit card; e-commerce security fraud detection; Hidden Markov Model.