DESIGN AND IMPLEMENTATION OF A CREDIT CARD FRAUD DETECTION SYSTEM

1.1 Introduction

A credit card is a thin rectangular slab of plastic issued by a financial company, that lets cardholders borrow funds with which to pay for goods and services. The effectiveness of any banking system depends on how secured the system is. The crave for information technology globally has greatly had an influence in our banking sectors. Thus a fest and quick development has erupted in many countries of the world in terms of automation advancement and technology. Such advancement includes the design and implementation of an automated fraud detection system which is witnessed in our various banking and financial sectors worldwide. From federal trade commission credit card fraud is defined as deception deliberately practiced with a view to gaining an unlawful or unfair advantage. In as much as financial sector is concerned, there should be possible ways made to avoid fraudulent from gaining access to the banking and all other financial sectors. By the introduction of an automated computer base security system, it will aid to eliminate totally the idea and practice of fraud in banking industries.

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Limitations of the Study and Definition of technical terms.

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1.2 Background of Study

Access Bank is chosen as the background of study for the project. Over the past 26 years, Access Bank Plc. has evolved from an obscure Nigerian Bank into a world-class African financial institution. Today, Access Bank are one of the five largest banks in Nigeria in terms of assets, loans, deposits and branch network; a feat which has been achieved through a robust long-term approach to client solutions – providing committed and innovative advice. Access Bank has built its strength and success in corporate banking and is now applying that expertise to the personal and business banking platforms it acquired from Nigeria’s International Commercial bank in 2012. The next two years were spent integrating the business, investing in infrastructure and strengthening the product offer. As part of its continued growth strategy, Access Bank is focused on mainstreaming sustainable business practices into its operations. The Bank strives to deliver sustainable economic growth that is profitable, environmentally responsible, and socially relevant (Accessbankplc, 2021).

In our day to day life, online transactions are increased to purchase goods and services. According to Nielsen study conducted in 2007-2008, 28 of the world’s total population has been using internet. 85 of these people has used internet to make online shopping and the rate of making online purchasing has increased by 40 from 2005 to 2008. The most common method of payment for online purchase is credit card .In developed countries and also in developing countries to some extent ,credit card is most acceptable payment mode for online and offline transaction. It can give financial loses to issuing authorities .In the second method purchasing i.e. Online, these transactions generally happen on telephone or internet and to make this kind of transaction, the user will need some important information about a credit card (such as credit card number, validity, CVV number, name of card holder).

In our daily lives, credit cards are used for purchasing goods and services with the help of virtual card for online transaction or physical card for offline transaction. In a physical-card based purchase, the cardholder presents his card physically to a merchant for making a payment. To carry out fraudulent transactions in this kind of purchase, an attacker has to steal the credit card. If the cardholder does not realize the loss of card, it can lead to a substantial financial loss to the credit card company. In online payment mode, attackers need only little information for doing fraudulent transaction (secure code, card number, expiration date etc.). In this purchase method, mainly transactions will be done through Internet or telephone. To commit fraud in these types of purchases, a fraudster simply needs to know the card details. Most of the time, the genuine cardholder is not aware that someone else has seen or stolen his card information. The only way to detect this kind of fraud is to analyze the spending patterns on every card and to figure out any inconsistency with respect to the “usual” spending patterns. Fraud detection based on the analysis of existing purchase data of cardholder is a promising way to reduce the rate of successful credit card frauds. Since humans tend to exhibit specific behaviorist profiles, every Card holder can be represented by a set of patterns containing information about the typical purchase category, the time since the last purchase, the amount of money spent, etc.

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1.3 Statement of Problem

Investigation revealed that the losses of a credit card fraud can affect all consumers, merchants and issuing banks. Therefore, it is important to establish techniques for detecting and preventing credit card fraud. This research contains a variety of techniques which can be used to build fraud detection systems. Understanding the characteristics of all those techniques can be a tedious task. A technique which promises a high predictive accuracy may be an appealing candidate to be used in the fraud detection system.

However, there are various different parameters that need to be considered before deciding which technique best suits the needs of a particular situation and also as all the transaction is maintained in a log. And also now a day’s lot of online purchase are made so we don’t know the person how is using the card online, we just capture the IP address for verification purpose. So there is a need to develop a system to fight cyber -crime and to aid in investigating the fraud. To avoid the entire above disadvantage we propose the system to detect the fraud in a best and easy way.

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1.4 Aim and Objective of the Study

The aim of the study is to Design and Implement a credit card fraud detection system to prevent credit card fraud. In achieving this aim, the following specific objectives were laid out as follows to develop an application software that will:

1. Keep record of every fraudulent credit card transaction online.
2. Aid in monitoring and controlling of credit card fraudulent activities.
3. Provide quick enquiry about information in financial sectors.
4. Easily detect a stolen credit card, track and report fraudulent transactions to relevant agency.
5. Show the effect in the manpower of the security department because on most occasions charging the manual information system to an automated information system will equally cause redundancy.

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1.5 Significance of Study

The design and implementation of computerized credit card fraud detection in banking system would lead to an effective and comprehensive fraud control in banking sectors. For examples, computerized verification of illegal access of customers accounts, computerized verification of signatures. In a matter of seconds the computer system enhanced to do all these tasks, then all criminal and fraud minded people will desist from such acts.

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1.6 Scope of the Study

This project work focus mainly on the design and implementation of computerized credit card fraud detection in banking system and also provides well developed software to automate the new system.

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1.7 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this institution to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
3. Research material: availability of research material is a major setback to the scope of the study.
4. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
5. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet).

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1.8 Definition of Terms

Credit Card: A credit card is a thin rectangular slab of plastic issued by a financial company, that lets cardholders borrow funds with which to pay for goods and services.

Fraudulent: Obtained, done by, or involving deception, especially criminal deception.

Fraud: Is defined as deception deliberately practiced with a view of gaining an unlawful or unfair advantage.