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On the Potential of Network-Based Features for Fraud Detection

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  • Catayoun Azarm
  • Erman Acar
  • Mickey van Zeelt

Abstract

Online transaction fraud presents substantial challenges to businesses and consumers, risking significant financial losses. Conventional rule-based systems struggle to keep pace with evolving fraud tactics, leading to high false positive rates and missed detections. Machine learning techniques offer a promising solution by leveraging historical data to identify fraudulent patterns. This article explores using the personalised PageRank (PPR) algorithm to capture the social dynamics of fraud by analysing relationships between financial accounts. The primary objective is to compare the performance of traditional features with the addition of PPR in fraud detection models. Results indicate that integrating PPR enhances the model's predictive power, surpassing the baseline model. Additionally, the PPR feature provides unique and valuable information, evidenced by its high feature importance score. Feature stability analysis confirms consistent feature distributions across training and test datasets.

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  • Catayoun Azarm & Erman Acar & Mickey van Zeelt, 2024. "On the Potential of Network-Based Features for Fraud Detection," Papers 2402.09495, arXiv.org, revised Feb 2024.
    • Handle: RePEc:arx:papers:2402.09495
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    References listed on IDEAS

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    1. John Muschelli, 2020. "ROC and AUC with a Binary Predictor: a Potentially Misleading Metric," Journal of Classification, Springer;The Classification Society, vol. 37(3), pages 696-708, October.
    2. Bermúdez, Ll. & Pérez, J.M. & Ayuso, M. & Gómez, E. & Vázquez, F.J., 2008. "A Bayesian dichotomous model with asymmetric link for fraud in insurance," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 779-786, April.
    3. Massimiliano Zanin & Miguel Romance & Santiago Moral & Regino Criado, 2018. "Credit Card Fraud Detection through Parenclitic Network Analysis," Complexity, Hindawi, vol. 2018, pages 1-9, May.
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