Parameters of automated fraud detection techniques during online transactions

Published date02 July 2018
DOIhttps://doi.org/10.1108/JFC-03-2017-0024
Date02 July 2018
Pages702-720
AuthorVipin Khattri,Deepak Kumar Singh
Subject MatterAccounting & Finance,Financial risk/company failure,Financial crime
Parameters of automated fraud
detection techniques during
online transactions
Vipin Khattri
Shri Ramswaroop Memorial University Institute of Technology,
Barabanki, India, and
Deepak Kumar Singh
Jaipuria Institute of Management, Lucknow, India
Abstract
Purpose This paper aims to provide information of parameters and techniques used in the automated
fraud detection system during online transaction. With the increase in the use of online transactions, the
concerns regardingdata security have also increased. To tackle the frauds,lot of research has been done and
plethora of papers are available on the related topics. The purpose of this paper is to provide the clear
pathway for researchers to move in the direction of development of automated fraud detection system to
prevent the fraudduring online transaction.
Design/methodology/approach This literature review analyses and comparesthe different types of
techniques for detecting fraud during online transaction. An in-depth study of the most prominent journals
has been done andthe core methodology of the papers has been presented. This articlealso shed some light on
differenttypes of parameters used in fraud detectiontechniques during online transaction.
Findings There are vast varieties of various fraud detection techniques, and every technique has
completed task in its ownway. After studying approximately 41 research papers,14 books and four reports,
in total 30 parameters have been identied and a detailedstudy of the parameters has been presented. The
parameters are also listed with their details that how theseparameters are used in the security system for
detectingonline transaction fraud.
Research limitations/implications This paper provides empiricalinsight about the parameters and
their prominencein the development of automated fraud detection security systemof online transaction. This
paper encouragesthe researchers to development of improved fraud detectionsystem.
Practical implications This paper will pave the way for researchersto do a focused research on the
fraud detectionmethodologies. The analysis will help in zeroing down themost prevalent topic of research in
this eld. Theresearchers will be able to understand the internaldetails of parameters and techniques usedin
the fraud detectionsystems. This literature also helps the researchto think in a variety of ways that how these
parameterswill be used in the development of fraud detection system.
Originality/value This paper is one of the most comprehensivereviews in its eld. It tries and attempts
to ll a void createdbecause of lack of compilation of the laid fraud detectionparameters.
Keywords Online transaction, Credit card, Fraud detection techniques,
Parameters of credit card fraud detection
Paper type Literature review
1. Introduction
One of the easiest ways to transfer the money from one account to another accountis online
transaction. This eventcan be performed from anywhere with the help of computer, internet
or transaction device. Online transaction is a suitable and simplest way to perform online
JFC
25,3
702
Journalof Financial Crime
Vol.25 No. 3, 2018
pp. 702-720
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-03-2017-0024
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
payment. You can use creditcard, debit card or just use small credentials of youraccount for
online transaction. Besides all security measures, different types of frauds have been
reported for online payment. A risk in terms of fraud is associated with every online
transaction (Papadopoulosand Brooks, 2011;Barker et al., 2008). It means fraud is an illegal
activity (Bhatla et al.,2003;Bai and Chen, 2013) that produces loss in terms of trust, money,
time and resources, etc. In online transaction fraud, candidate has to bear nancial loss.
Euromonitor International(Delamaire et al., 2009) quoted that 120 million credit cards,debit
cards and charge cards were brought into use in Germany in 2004. The total transactions
were performed by cards approximate e375bn in 2004 which was 4 per cent increase from
2003. This increase of creditcard is because of high use of credit card and easily achievable
of credit card fraud. Annual report providedinformation (Financial Fraud Action-UK, 2017)
that only in the UK-card fraud loss was £467m in 2006 and it was increased to £567.5m in
2015. Credit card fraud may be achievedin various ways such as bankruptcy (a person who
is not able to pay for transaction using credit card), theft fraud (credit card is used by
someone else), counterfeit fraud (using credit cards details) and application fraud (credit
card is applied with false information). In current scenario, there ishuge increase in number
credit cards, debit card and point of sale machine for performing online transaction as a
result online transaction fraud is also increasing. There are various online fraud detection
techniques available and performs well but society requires an improved fraud detection
system because fraud is becomingmore sophisticated. The focus of this paper is to analyzed
different online fraud detection techniques using various methodology and parameters
(Oracle Financial ServicesSoftware, 2014) use to present the fraud during online transaction.
Information ow of this paperis organized in ve sections as follows. Section 2 analyzed the
online transaction fraud detection techniques. This section also gives the comprehensive
summary of different fraud detection techniques.Section 3 analyzed the parameters used in
different online fraud detection techniques. This section also gives the comprehensive
summary of parameter used in different fraud detection techniques. Section 4 contains the
conclusion. Finally,Section 5 gives the future scope of this study for the researchers to move
forward on clear pathway.
2. Fraud detection techniques
Online transaction fraud detection technique is an automated screening tool that is used to
identify whether the online transaction is fraudulent or not. It is very helpful when fraud is
detected immediately during online transaction. Therefore, nancial institutionsare always
looking better solution for identication of fraud. As fraudster uses sophisticated methods
for committing fraud, new improved technologies need to be identied accordingly.
As emerging of new technologies, new innovations are inevitable for detecting the
fraudulent transaction because fraudsters are committing fraudulent transaction in a new
way every time. The various techniques are used to nd the fraudulent transaction such as
hidden Markov model (Agrawal et al.,2015;Prakash and Chandrasekar, 2015;Dhok and
Bamnote, 2012;Prakash and Chandrasekar, 2012;Khan et al., 2014b), articial neural
network (Behera and Panigrahi, 2015;Bekirev et al., 2015;Carneiro et al., 2015;Van
Vlasselaer et al.,2015;Khan et al., 2014a;Brause et al., 1999;Aleskerov et al.,1997), big data
(Chen et al.,2015), genetic (Assis et al.,2014;Ramakalyani and Umadevi, 2012;Duman and
Ozcelik, 2011), articial immune system (Halvaiee and Akbari, 2014;Soltani et al., 2012),
Bayesian (Singh and Singh, 2015;Renuga et al.,2014;Panigrahi et al.,2009), migrating bird
optimization (Duman and Elikucuk, 2013;Duman and Elikucuk, 2013), data mining (Philip
and Sherly, 2012) and others (Sánchez et al.,2009;Quah and Sriganesh, 2008;Bentley et al.,
2000;Ganji and Mannem,2012). Every methodology has its own characteristics with their
Automated
fraud detection
techniques
703

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