Automatic machine learning algorithms for fraud detection in digital payment systems

Authors

DOI:

https://doi.org/10.15587/1729-4061.2020.212830

Keywords:

digital payments, machine learning, automated synthesis, fraud detection, data science

Abstract

Data on global financial statistics demonstrate that total losses from fraudulent transactions around the world are constantly growing. The issue of payment fraud will be exacerbated by the digitalization of economic relations, in particular the introduction by banks of the concept of "Bank-as-a-Service", which will increase the burden on payment services.

The aim of this study is to synthesize effective models for detecting fraud in digital payment systems using automated machine learning and Big Data analysis algorithms.

Approaches to expanding the information base to detect fraudulent transactions have been proposed and systematized. The choice of performance metrics for building and comparing models has been substantiated.

The use of automatic machine learning algorithms has been proposed to resolve the issue, which makes it possible in a short time to go through a large number of variants of models, their ensembles, and input data sets. As a result, our experiments allowed us to obtain the quality of classification based on the AUC metric at the level of 0.977‒0.982. This exceeds the effectiveness of the classifiers developed by traditional methods, even as the time spent on the synthesis of the models is much less and measured in hours. The models' ensemble has made it possible to detect up to 85.7 % of fraudulent transactions in the sample. The accuracy of fraud detection is also high (79‒85 %).

The results of our study confirm the effectiveness of using automatic machine learning algorithms to synthesize fraud detection models in digital payment systems. In this case, efficiency is manifested not only by the resulting classifiers' quality but also by the reduction in the cost of their development, as well as by the high potential of interpretability. Implementing the study results could enable financial institutions to reduce the financial and temporal costs of developing and updating active systems against payment fraud, as well as improve the effectiveness of monitoring financial transactions

Author Biographies

Oleh Kolodiziev, Simon Kuznets Kharkiv National University of Economics Nauky аve., 9-A, Kharkiv, Ukraine, 61166

Doctor of Economic Sciences, Professor, Head of Department

Department of Banking and Financial Services

Aleksey Mints, Pryazovskyi State Technical University Universitetska str., 7, Mariupol, Ukraine, 87555

Doctor of Economic Sciences, Associate Professor, Head of Department

Department of Finance and Banking

Pavlo Sidelov, Pryazovskyi State Technical University Universitetska str., 7, Mariupol, Ukraine, 87555

Postgraduate Student

Department of Finance and Banking

Inna Pleskun, Simon Kuznets Kharkiv National University of Economics Nauky аve., 9-A, Kharkiv, Ukraine, 61166

Postgraduate Student

Department of Banking and Financial Services

Olha Lozynska, Simon Kuznets Kharkiv National University of Economics Nauky аve., 9-A, Kharkiv, Ukraine, 61166

Postgraduate Student

Department of Banking and Financial Services

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Published

2020-10-31

How to Cite

Kolodiziev, O., Mints, A., Sidelov, P., Pleskun, I., & Lozynska, O. (2020). Automatic machine learning algorithms for fraud detection in digital payment systems. Eastern-European Journal of Enterprise Technologies, 5(9 (107), 14–26. https://doi.org/10.15587/1729-4061.2020.212830

Issue

Vol. 5 No. 9 (107) (2020): Information and controlling system

Section

Information and controlling system

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Copyright (c) 2020 Oleh Kolodiziev, Aleksey Mints, Pavlo Sidelov, Inna Pleskun, Olha Lozynska

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