Using Genetic Algorithm to Improve Classification of Imbalanced Datasets for Credit Card Fraud Detection

With the growing usage of credit card transactions, financial fraud crimes have also been drastically increased leading to the loss of huge amounts in the finance industry. Having an efficient fraud detection method has become a necessity for all banks in order to minimize such losses. In fact, credit card fraud detection system involves a major challenge: the credit card fraud data sets are highly imbalanced since the number of fraudulent transactions is much smaller than the legitimate ones. Thus, many of traditional classifiers often fail to detect minority class objects for these skewed data sets. This paper aims first: to enhance classified performance of the minority of credit card fraud instances in the imbalanced data set, for that we propose a sampling method based on the K-means clustering and the genetic algorithm. We used K-means algorithm to cluster and group the minority kind of sample, and in each cluster we use the genetic algorithm to gain the new samples and construct an accurate fraud detection classifier.