Optimizing credit card fraud detection: a deep learning approach to imbalanced datasets

Imbalanced datasets pose a significant challenge in credit card fraud detection, hindering the training effectiveness of models due to the scarcity of fraudulent cases. This study addresses the critical problem of data imbalance through an in-depth exploration of techniques, including cross-entropy loss minimization, weighted optimization, and synthetic minority oversampling technique-based resampling, coupled with deep neural networks (DNNs). The urgent need to combat class imbalances incredit card fraud datasets is underscored, emphasizing the  creation of reliable detection models. The research method delves into the application of DNNs, strategically optimizing and resampling the dataset to enhance model performance. The study employs a dataset from October 2018, containing 284,807 transactions, with a mere 492 classified as fraudulent. Various resampling techniques, such as undersampling and SMOTE oversampling, are evaluated alongside weighted optimization. The results showcase the effectiveness of SMOTE oversampling, achieving an accuracy of 99.83% without any false negatives. The study concludes by advocating for flexible strategies, integrating cutting-edge machine learning methods, and developing adaptive defenses to safeguard against emerging financial risks in credit card fraud detection.