Design And Implementation Of A Credit Card Fraud Detection System

Introduction

1.1 Background Of The Study

In our day to day life, online transactions are increased to purchase goods and services. According to Nielsen study conducted in 2007-2008, 28 of the world’s total population has been using internet. 85 of these people has used internet to make online shopping and the rate of making online purchasing has increased by 40 from 2005 to 2008. The most common method of payment for online purchase is credit card .In developed countries and also in developing countries to some extent ,credit card is most acceptable payment mode for online and offline transaction. It can give financial loses to issuing authorities .In the second method purchasing i.e.

Online, these transactions generally happen on telephone or internet and to make this kind of transaction, the user will need some important information about a credit card (such as credit card number, validity, CVV number, name of card holder).

In our daily lives, credit cards are used for purchasing goods and services with the help of virtual card for online transaction or physical card for offline transaction. In a physical-card based purchase, the cardholder presents his card physically to a merchant for making a payment. To carry out fraudulent transactions in this kind of purchase, an attacker has to steal the credit card. If the cardholder does not realize the loss of card, it can lead to a substantial financial loss to the credit card company. In online payment mode, attackers need only little information for doing fraudulent transaction (secure code, card number, expiration date etc.). In this purchase method, mainly transactions will be done through Internet or telephone. To commit fraud in these types of purchases, a fraudster simply needs to know the card details. Most of the time, the genuine cardholder is not aware that someone else has seen or stolen his card information. The only way to detect this kind of fraud is to analyze the spending patterns on every card and to figure out any inconsistency with respect to the “usual” spending patterns. Fraud detection based on the analysis of existing purchase data of cardholder is a promising way to reduce the rate of successful credit card frauds. Since humans tend to exhibit specific behaviorist profiles, every Card holder can be represented by a set of patterns containing information about the typical purchase category, the time since the last purchase, the amount of money spent, etc.

Deviation from such patterns is a potential threat to the system

1.2 Statement Of The Problem

It has already been mentioned that the losses of a credit card fraud can affect all consumers, merchants and issuing banks. Therefore, it is important to establish techniques for detecting and preventing credit card fraud. This research contains a variety of techniques which can be used to build fraud detection systems. Understanding the characteristics of all those techniques can be a tedious task. A technique which promises a high predictive accuracy may be an appealing candidate to be used in the fraud detection system. However, there are various different parameters that need to be considered before deciding which technique best suits the needs of a particular situation. And also as all the transaction is maintained in a log. And also now a day’s 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 is a need to develop a system to fight cyber -crime and to aid in investigating the fraud. To avoid the entire above disadvantage we propose the system to detect the fraud in a best and easy way.

1.3 Aims And Objective Of The Study

This research aims at the Design and Implementation of a credit card fraud detention system to prevent credit card fraud.

The following are the objectives of the study:

Develop a system to keep record of every fraudulent credit card transaction online.

A system to easily detect a stolen credit card.

To easily track and report fraudulent transactions to relevant agency.

1.4 Scope Of The Study

The scope of the research is focused on implementing a credit card fraud detention system to compact the increasing cyber-crimes faced by our country.

1.5 Definition Of Terms

Credit Card

A credit card is a thin rectangular slab of plastic issued by a financial company, that lets cardholders borrow funds with which to pay for goods and services.

Fraudulent

Obtained, done by, or involving deception, especially criminal deception.

Verification

The process of establishing the truth, accuracy, or validity of something.

Consumer

A person who purchases goods and services for personal use.

Transaction

An instance of buying or selling something.

Purchase

Acquire (something) by paying for it; buy.