Credit card fraud detection using a deep learning multistage model

Abstract

The banking sector is on the eve of a serious transformation and the thrust behind it is artificial intelligence (AI). Novel AI applications have been already proposed to deal with challenges in the areas of credit scoring, risk assessment, client experience and portfolio management. One of the most critical challenges in the aforementioned sector is fraud detection upon streams of transactions. Recently, deep learning models have been introduced to deal with the specific problem in terms of detecting and forecasting possible fraudulent events. The aim is to estimate the unknown distribution of normal/fraudulent transactions and then to identify deviations that may indicate a potential fraud. In this paper, we elaborate on a novel multistage deep learning model that targets to efficiently manage the incoming streams of transactions and detect the fraudulent ones. We propose the use of two autoencoders to perform feature selection and learn the latent data space representation based on a nonlinear optimization model. On the delivered significant features, we subsequently apply a deep convolutional neural network to detect frauds, thus combining two different processing blocks. The adopted combination has the goal of detecting frauds over the exposed latent data representation and not over the initial data. © 2022, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.