Abstract

Every online transaction comes with a risk and it is the merchant’s liability to detect and stop fraudulent transactions. Merchants utilize various mechanisms to prevent and manage fraud such as automated fraud detection systems and manual transaction reviews by expert fraud analysts. Many proposed solutions mostly focus on fraud detection accuracy and ignore financial considerations. Also, highly effective manual review process is overlooked. We propose Profit Optimizing Neural Risk Manager (PONRM), a decision maker that (a) constitutes optimal collaboration between machine learning models and human expertise under industrial constraints, (b) is cost and profit sensitive. We suggest directions on how to characterize fraudulent behavior and assess the risk of a transaction. We show that our framework outperforms cost-sensitive and cost-insensitive baselines on three real-world merchant datasets.

Original languageEnglish (US)
Title of host publicationArtificial Intelligence Applications and Innovations - 14th IFIP WG 12.5 International Conference, AIAI 2018, Proceedings
PublisherSpringer New York LLC
Pages323-336
Number of pages14
ISBN (Print)9783319920061
DOIs
StatePublished - Jan 1 2018
Event14th IFIP WG 12.5 International Conference on Artificial Intelligence Applications and Innovations, AIAI 2018 - Rhodes, Greece
Duration: May 25 2018May 27 2018

Publication series

NameIFIP Advances in Information and Communication Technology
Volume519
ISSN (Print)1868-4238

Other

Other14th IFIP WG 12.5 International Conference on Artificial Intelligence Applications and Innovations, AIAI 2018
CountryGreece
CityRhodes
Period5/25/185/27/18

Keywords

  • Cost-sensitive learning
  • E-commerce
  • Fraud detection
  • Risk management

ASJC Scopus subject areas

  • Information Systems
  • Computer Networks and Communications
  • Information Systems and Management

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  • Cite this

    Yildirim, M. Y., Ozer, M., & Davulcu, H. (2018). Cost-sensitive decision making for online fraud management. In Artificial Intelligence Applications and Innovations - 14th IFIP WG 12.5 International Conference, AIAI 2018, Proceedings (pp. 323-336). (IFIP Advances in Information and Communication Technology; Vol. 519). Springer New York LLC. https://doi.org/10.1007/978-3-319-92007-8_28