A genetic programming approach for fraud detection in electronic transactions

The volume of online transactions has increased considerably in the recent years. Consequently, the number of fraud cases has also increased, causing billion dollar losses each year worldwide. Therefore, it is mandatory to employ mechanisms that are able to assist in fraud detection. In this work, it is proposed the use of Genetic Programming (GP) to identify frauds (charge back) in electronic transactions, more specifically in online credit card operations. A case study, using a real dataset from one of the largest Latin America electronic payment systems, has been conducted in order to evaluate the proposed algorithm. The presented algorithm achieves good performance in fraud detection, obtaining gains up to 17% with regard to the actual company baseline. Moreover, several classification problems, with considerably different datasets and domains, have been used to evaluate the performance of the algorithm. The effectiveness of the algorithm has been compared with other methods, widely employed for classification. The results show that the proposed algorithm achieved good classification effectiveness in all tested instances.