USI develops innovative system for better credit card fraud detection

(Image: Pixabay CC0) - The use of credit cards and other cashless or digital payment methods has become the norm for consumers all over the globe, and the strong surge of online buying during the pandemic has further boosted this decade-long trend. However, behind the convenience of 'click and pay' there are also risks, such as fraud and related losses, which are mostly borne by the card companies. How to combat credit card fraud, or at least limit the damage? Researchers at USI have recently completed a project, performed in collaboration with a major credit card company in Switzerland, that has developed an innovative probabilistic model for the efficient detection of fraudulent transactions. It is estimated that worldwide, losses to card companies amount to more than 7,15 cents for every $100 of credit card transactions - a figure that translates to about $25 billion in real terms, and it is estimated that this figure could double by 2025. We had reported on this in 2016, when Dr Bruno Buonaguidi , a researcher at USI under the supervision of Professor Antonietta Mira , won a grant from the AXA Research Fund to lead the project (see Quicklink in the sidebar). The project has now been completed and the results published in the scientific journal Bayesian Analysis . But what does the solution devised at USI consist of? "We have developed a system that works in two phases, the training phase followed by the classification phase," explains Dr Buonaguidi.