Fuzzy rule-based analysis of spatio-temporal ATM usage data for fraud detection and prevention

Abstract

This article presents a novel approach for detecting fraudulent behaviors from automated teller machine (ATM) usage data by analyzing geo-behavioral habits of the customers and describe the use of a fuzzy rule-based system capable of classifying suspicious and non-suspicious financial transactions. Firstly, the geographic entropies of ATM cardholders are computed from the spatio-temporal ATM transactions data to form customer classes of mobility. ATM transactions exhibit spatio-temporal properties by inclusion of location information. The transition data can be generated by using transaction data from the current location to the next one. Once, the transition data are generated, statistical outlier detection techniques can be utilized. On top of classical methods, crisp unsupervised methods can easily be used for detecting outliers in the transition data. In addition, fuzzy C-Means algorithm can be implemented to determine outliers. In this study, ATM usage dataset containing around two years' worth of data, provided by a mid-size Turkish bank was analyzed. It was shown that a significant bulk of ATM users does not leave the vicinity of their living places. Some insightful business rules that can be extracted from geo-tagged ATM transaction data by means of using a fuzzy rule-based system were also presented.