A Supervised Ml Algorithm for Detecting and Predicting Fraud Credit Card Transactions

A Credit card fraud presents an escalating threat in today's digital economy, leading to significant financial losses for consumers, businesses, and financial institutions. Traditional detection methods are increasingly inadequate due to the rise in online transactions and the evolving complexity of fraudulent activities. This research aims to create a reliable supervised machine learning model designed to detect and predict fraudulent credit card transactions in real-time. Our approach leverages advanced algorithms and extensive datasets to enhance transaction security, thereby mitigating financial risks. Current systems, like FICO's Fraud Detection System (FDS), utilize a range of supervised learning techniques, including Decision Trees, Random Forests, and Neural Networks. However, they face limitations, including data quality issues, high false positive rates, and the need for continuous retraining to adapt to evolving fraud patterns. To address these challenges, we propose an innovative anomaly detection method based on the Isolation Forest algorithm. Unlike traditional methods that rely on distance and density measures, Isolation Forests isolate anomalies by randomly selecting features and split values, making it more efficient in identifying fraudulent transactions, especially in imbalanced datasets. The proposed system boasts low linear time complexity and minimal memory requirements, enabling the construction of high-performing models even with large datasets. The research demonstrates that the Isolation Forest approach significantly outperforms traditional models in detecting credit card fraud, offering a promising solution for enhancing security in the financial ecosystem.