Open Access
Journal Article
Predictive Modeling for Fraud Detection
by
Daniel Thomas
Abstract
The purpose of this paper is to investigate the effectiveness of predictive modeling in the field of fraud detection within financial institutions. Fraud detection is a crucial task for businesses to protect themselves against financial loss and maintain the integrity of their operations. Traditional methods of fraud detection often rely on manual review and rule-based systems,
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The purpose of this paper is to investigate the effectiveness of predictive modeling in the field of fraud detection within financial institutions. Fraud detection is a crucial task for businesses to protect themselves against financial loss and maintain the integrity of their operations. Traditional methods of fraud detection often rely on manual review and rule-based systems, which are time-consuming and prone to errors. In contrast, predictive modeling offers a more efficient and accurate approach by analyzing historical data to identify patterns and anomalies that may indicate fraudulent activity. This study explores the application of various machine learning algorithms, such as logistic regression, decision trees, and neural networks, to predict fraud occurrences. The results demonstrate that predictive models can significantly enhance the detection rates of fraudulent transactions while reducing false positives. Additionally, this paper discusses the challenges associated with implementing predictive models in the real world, including data quality, model interpretability, and the potential for model bias. By addressing these challenges, the study aims to provide insights into the development and deployment of robust predictive models for fraud detection.