Credit Card Fraud Detection Using Hidden Markov Model

Abstract

Credit card is the most popular mode of payment for both online as well as offline. The use of credit cards has increased day by day and a fraudulent transaction has also increased day by day in today’s world. Credit card provides cashless shopping at every shop in the world. In Credit card fraud detection system, fraudulent transaction will be detected after transaction is done. Credit card fraud can be detected using Hidden Markov Model (HMM) during transactions. Hidden Markov Model is the tools for solve “hidden” problems. In this paper, the sequence of operations in credit card transaction processing system using a Hidden Markov Model and show how it can be used for the detection of fraud. Using Hidden Markov Model, the fraud detection processing system is trained with the standard procedures and spending patterns of a card user.