On-Device Privacy-Preserving Fraud Detection for Smart Consumer Environments Using Federated Learning

This paper discusses an on-device artificial intelligence (AI) solution for real-time, privacy-preserving fraud detection in smart financial environments, ensuring privacy-preserving consumer transactions. We suggest a distributed, on-device fraud detection solution that uses federated learning (FL) to improve privacy while detecting fraudulent transactions efficiently across decentralized smart environments. In this work, we used several models, including reinforcement learning (RL) agent and Random Forest, and we tested their performance using several measures like accuracy, precision, recall, and F-score, ensuring their applicability to smart environments with resource constraints. The recommended mechanism also uses t-Distributed Stochastic Neighbor Embedding (t-SNE) and Principal Component Analysis (PCA) to reduce dimensions of data, visualize the results, and evaluate the success rate of transactions classified as fraudulent and non-fraudulent. In our methodology, we applied data collection, data preprocessing, and cleaning, and we evaluated the metrics of selected models to allocate resources effectively and support decision-making processes in edge-based fraud detection systems within smart environments.

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Publication Details

Journal
Applied Sciences
Published
2026-01-14
DOI
https://doi.org/10.3390/app16020835
Primary Topic
Imbalanced Data Classification Techniques
Type
article
Field-Weighted Citation Impact
0.00
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On-Device Privacy-Preserving Fraud Detection for Smart Consumer Environments Using Federated Learning

Andreas P. Plageras, Christos Stergiou, Kostas E. Psannis, Alexandros I. Bermperis et al.
Applied Sciences
Imbalanced Data Classification Techniques
article

On-Device Privacy-Preserving Fraud Detection for Smart Consumer Environments Using Federated Learning

Andreas P. Plageras, Christos Stergiou, Kostas E. Psannis, Alexandros I. Bermperis, Vasileios A. Memos
article en

Abstract

This paper discusses an on-device artificial intelligence (AI) solution for real-time, privacy-preserving fraud detection in smart financial environments, ensuring privacy-preserving consumer transactions. We suggest a distributed, on-device fraud detection solution that uses federated learning (FL) to improve privacy while detecting fraudulent transactions efficiently across decentralized smart environments. In this work, we used several models, including reinforcement learning (RL) agent and Random Forest, and we tested their performance using several measures like accuracy, precision, recall, and F-score, ensuring their applicability to smart environments with resource constraints. The recommended mechanism also uses t-Distributed Stochastic Neighbor Embedding (t-SNE) and Principal Component Analysis (PCA) to reduce dimensions of data, visualize the results, and evaluate the success rate of transactions classified as fraudulent and non-fraudulent. In our methodology, we applied data collection, data preprocessing, and cleaning, and we evaluated the metrics of selected models to allocate resources effectively and support decision-making processes in edge-based fraud detection systems within smart environments.

Applied SciencesVol. 16(2)
University of Macedonia (GR)
Peace, Justice and strong institutions
Openalex Percentile: Top 89%
Imbalanced Data Classification Techniques
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