FFD: A federated learning based method for credit card fraud detection

Abstract

Credit card fraud has caused a huge loss to both banks and consumers in recent years. Thus, an effective Fraud Detection System (FDS) is important to minimize the loss for banks and cardholders. Based on our analysis, the credit card transaction dataset is very skewed, there are much fewer samples of frauds than legitimate transactions. Furthermore, due to the data security and privacy, different banks are usually not allowed to share their transaction datasets. These problems make FDS difficult to learn the patterns of frauds and also difficult to detect them. In this paper, we propose a framework to train a fraud detection model using behavior features with federated learning, we term this detection framework FFD (Federated learning for Fraud Detection). Different from the traditional FDS trained with data centralized in the cloud, FFD enables banks to learn fraud detection model with the training data distributed on their own local database. Then, a shared FDS is constructed by aggregating locally-computed updates of fraud detection model. Banks can collectively reap the benefits of shared model without sharing the dataset and protect the sensitive information of cardholders. Furthermore, an oversampling approach is combined to balance the skewed dataset. We evaluate the performance of our credit card FDS with FFD framework on a large scale dataset of real-world credit card transactions. Experimental results show that the federated learning based FDS achieves an average of test AUC to 95.5%, which is about 10% higher than traditional FDS.