Innovative technologies in credit card fraud detection: A centralized approach

Credit card transactions are the preferred method of payment, replacing cash transactions in the Unites States since 1951. The increasing popularity of credit cards raises a large concern on fraud; losses exceed 800 million dollars in the US and 2 billion dollars globally every year. Companies continuously invest in fraud prevention and detection algorithms to protect the user from fraud activity. The low percentage of fraudulent transactions in contrast to the number of legitimate transactions poses a challenge for financial institutions whose fraud detection techniques rely on data mining algorithms. This paper discusses known methods for credit card fraud detection and addresses the challenges faced by financial institutions in the successful and cost-efficient implementation of fraud detection techniques. Recent developments in credit card technologies are reviewed in the proposal of a new fraud detection model where transactional data is collected from multiple financial institutions. Some recent innovations include: universal credit card, credit card with push buttons, and finger/hand detection methods to protect from fraud. This study will aid credit card companies in the improvement of fraud detection programs by leveraging technologies and the power of analyzing overall fraudulent patterns in credit card transactions.