Credit Card Fraud Detection using KNN, Random Forest and Logistic Regression Algorithms : A Comparative Analysis

Abstract

Because credit cards are utilized so frequently, fraud appears to be a significant concern in the credit card industry. It is challenging to quantify the effects of misrepresentation. Globally, credit card fraud has cost institutions and consumers billions of dollars. Despite the existence of numerous anti-fraud mechanisms, fraudsters continue to seek out novel methods and strategies to commit fraud. An additional challenge in the estimation of credit card fraud loss is that the magnitude of unreported or undetected forgeries cannot be determined, only losses associated with those frauds that have been detected can be measured. Implementing effective fraud detection algorithms through the utilization of machine-learning techniques is crucial in order to mitigate these losses and provide support to fraud investigators. This paper presents a machine learning-based method for the detection of credit card fraud. Three methodologies are implemented on the raw and pre-processed data. Python is used to implement the work. By comparing the accuracy-based performance evaluations of k-nearest neighbor and logistic regression with Random Forest, it is determined that the former exhibits superior performance.