Application of Machine Learning Models in Fraud Detection in Financial Transactions

Authors

  • Roberto Carlos Dávila Morán Universidad Continental (UC), Facultad de Ingeniería, Carrera de Ingeniería Industrial. Ciudad de Huancayo, Perú Author https://orcid.org/0000-0003-3181-8801
  • Rafael Alan Castillo Sáenz Universidad San Ignacio de Loyola (USIL), Facultad de Ciencias Empresariales, Carrera de International Business. Ciudad de Lima, Perú. Author https://orcid.org/0000-0001-8122-3879
  • Alfonso Renato Vargas Murillo Universidad Privada del Norte (UPN), Facultad de Derecho y Ciencias Políticas, Carrera de Derecho. Ciudad de Lima, Perú Author https://orcid.org/0000-0003-4205-2215
  • Leonardo Velarde Dávila Universidad Peruana de Ciencias Aplicadas (UPC), Facultad de Negocios, Carrera de Administración. Ciudad de Lima, Perú Author https://orcid.org/0000-0002-8096-0196
  • Elvira García Huamantumba Universidad Privada Norbert Wiener (UPNW), Facultad de Ingeniería y Negocios, Carrera de Administración y Negocios Internacionales. Ciudad de Lima, Perú Author https://orcid.org/0000-0001-7773-828X
  • Camilo Fermín García Huamantumba Universidad Privada Norbert Wiener (UPNW), Facultad de Ingeniería y Negocios, Carrera de Administración y Negocios Internacionales. Ciudad de Lima, Perú Author https://orcid.org/0009-0007-2624-7350
  • Renzo Fidel Pasquel Cajas Universidad Nacional Hermilio Valdizán (UNHEVAL), Escuela de Posgrado, Ciudad de Huánuco, Perú Author https://orcid.org/0000-0001-6292-5955
  • Carlos Enrique Guanilo Paredes Universidad Autónoma del Perú (UA), Facultad de Ciencias de la Gestión y Comunicaciones, Carrera de Administración de Empresas, Ciudad de Lima, Perú Author https://orcid.org/0000-0001-8935-5366

DOI:

https://doi.org/10.56294/dm2023109

Keywords:

Fraud Detection, Machine Learning, Convolutional Neural Networks, Random Forests, Performance Evaluation

Abstract

Introduction: fraud detection in financial transactions has become a critical concern in today's financial landscape. Machine learning techniques have become a key tool for fraud detection given their ability to analyze large volumes of data and detect subtle patterns.
Objective: evaluate the performance of machine learning techniques such as Random Forest and Convolutional Neural Networks to identify fraudulent transactions in real time.
Methods: a real-world data set of financial transactions was obtained from various institutions. Data preprocessing techniques were applied that include multiple imputation and variable transformation. Models such as Random Forest, Convolutional Neural Networks, Naive Bayes and Logistic Regression were trained and optimized. Performance was evaluated using metrics such as F1 score.
Results: random Forests and Convolutional Neural Networks achieved an F1 score greater than 95% on average, exceeding the target threshold. Random Forests produced the highest average F1 score of 0,956. It was estimated that the models detected 45 % of fraudulent transactions with low variability.
Conclusions: the study demonstrated the effectiveness of machine learning models, especially Random Forests and Convolutional Neural Networks, for accurate real-time fraud detection. Its high performance supports the application of these techniques to strengthen financial security. Future research directions are also discussed

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Published

2023-10-27

Issue

Section

Original

How to Cite

1.
Dávila Morán RC, Castillo Sáenz RA, Vargas Murillo AR, Velarde Dávila L, García Huamantumba E, García Huamantumba CF, et al. Application of Machine Learning Models in Fraud Detection in Financial Transactions. Data and Metadata [Internet]. 2023 Oct. 27 [cited 2024 Oct. 13];2:109. Available from: https://dm.ageditor.ar/index.php/dm/article/view/71