Implementing Fraud Transaction Detection Using MLOPs

Ashish Kumar 17 Nov, 2023 • 16 min read

Introduction

In today’s digital world, people are increasingly shifting towards online transactions and digital payment due to convenience rather than cash. With the increase in transition, there is also an increase in fraud. Fraud transaction can be of any type as it involves requesting money using false identity or false information. This poses a significant problem for individuals and financial institutions. In this project, we will use the credit card dataset to design the MLOPs model using the Airflow tool to monitor live transactions and predict whether they are genuine or fraudulent.

Learning Objectives

  • Importance of detecting Fraud Transaction.
  • Cleaning Data, transforming datasets, and preprocessing datasets.
  • Visually analysis of the dataset to derive insight.
  • Real-world application of Fraud Transaction detection model using in data science.
  • Performing Fraud Transaction data analysis using the Python programming language
  • Building End-to-End Fraud detection using MS Azure and Airflow

This article was published as a part of the Data Science Blogathon.

What is the Fraud Transaction estimation model?

The Fraud transaction dataset contains data from different sources, which contain columns such as transaction time, name, amount, gender, category, etc. The Fraud transaction estimation model is a Machine learning model developed to predict the false transaction. The model is trained on a large set of valid and fraudulent transactions. To predict the new false transaction.

What Fraud Transaction Analysis?

Fraud transaction analysis is the process of analyzing the past dataset. The dataset analysis aims to find the irregularity in the data and find the patterns in the dataset. Fraud transaction analysis plays a crucial role in business to protect customers and reduce financial loss. There are different types of fraud transaction analysis, such as Rule-based analysis and Anomaly detection.

  • Rule-based Analysis: The rule-based analysis involves creating a rule to flag the invalid transaction. For example, rules may be made based on geographical region.
  • Anomaly Detection: Anomaly detection involves finding an unusual or abnormal transaction. For example, a transaction made from a new IP address.

Importance of Detecting Fraud Transaction

Detecting fraudulent transactions is essential for businesses and financial institutions to protect customers against fraud and safeguard their money. Below are some crucial reasons for detecting fraudulent transactions.

  • Reducing Financial Losses: Fraud transactions cost businesses a significant amount of money, reducing their profit. So, it becomes essential for companies to detect fraudulent transactions.
  • Protecting Reputation: Maintaining reputation is one of the essential things for businesses as it leads to the loss of potential clients and customers.
  • Protecting Customer and Business: Fraud transactions can cause a financial loss and emotional impact on customers. By detecting fraud, transaction business can safeguard customer and their business.

Data Collection and Preprocessing

Data collection and preprocessing is the important part of developing the fraud detection model. Once the data is collected, there are several steps to be performed on the dataset.

  • Data Cleaning: Data cleaning involves removing unwanted data, such as duplicate data, and filling missing data values.
  • Data Transformation: Data transformation involves converting data columns into required data types that can be used for analysis. This step ensures that data quality is maintained.
  • Data Exploration: Data exploration involves understanding the dataset and finding the relationship and pattern between the data.
  • Handling Imbalanced Data: The Fraud detection dataset is highly imbalanced as there are many valid transactions and a small number of fraud transactions. So, there is a high chance that the model can become overfitting. This problem can be tackled using over-sampling or under-sampling techniques. Using these techniques, we can create a balanced dataset.

Visualizing Fraud Detection Dataset Using Libraries

Looking at numerical numbers may not help you to give a relationship among them. We will use Python libraries to plot graphs and chat to get insights from the dataset.

  • Matplotlib: One of the essential tools in Python used to create different types of chat and graphs like bar and line charts.
  • Seaborn: This is another visualization tool in Python. It helps create more detailed visualization images like heat maps and violin plots.

Techniques used to visualize the hotel booking dataset.

  • Countplot: Countplot is used to plot the histogram of categorical value. This helps plot fraud against different categorical values, which helps understand their relationship.
  • Distplot: Using distplot, we can determine the distribution over time. This helps in checking the skewness.

Use Cases and Applications of Fraud Detection MLOPs Model

The fraud detection MLOP model has multiple use cases across different industries. Below is the use case application:

  1. Banking and Financial Institution: – Banking and Financial Institutions use MLOP tools to detect fraudulent transactions such as credit card and insurance fraud. By using these tools, they can reduce fraud.
  2. E-Commerce and Retail Sector: – Identification of fraud transactions during item purchase of an item can help in protecting customer data and company business.
  3. Health Care and Hospitality: – Healthcare uses the MLOPs to defect false medical claims or billing practices. Using a detection model, these false practices can be reduced.
  4. Telecom and E-Ticketing: – Detecting false sim-swap, subscription frauds, and false bookings. This issue can be tackled using the MLOPs model.

Challenges and Best Practices in Fraud Detection MLOPs Model

Building a fraud detection model have several challenges for various reason:

  • Data quality: The fraud detection model is trained on historical data, in which data quality plays a crucial role. The better the dataset, the more accurate the model will be. The fraud dataset is more of an imbalanced dataset, which means we have more valid transactions compared to invalid transactions. This poses a challenge in the model training phase.
  • Data privacy: Fraud transaction often occurs due to violation of customer or business data access through unauthorized means. Designing the model in such a way that the customer data privacy is maintained.
  • Model drift: Model drift poses a significant challenge due to changes in data quality. Ensuring that the model doesn’t face model drift requires maintaining data quality and monitoring the model.
  • Real-time Processing: Real-time processing often comes with more challenges as it adds one more layer of complexity.

Best Practices while Building a Fraud Detection Model

Best practices while creating a Fraud detection model are discussed below

  • Feature Engineering: After completing data collection, we perform data preprocessing and feature engineering to ensure we obtain good-quality data.
  • Imbalanced Data Handling: Fraud detection datasets often exhibit an imbalance, with many valid transactions compared to fraudulent transactions. This imbalance often results in bias in the model. To address this issue, we use under-sampling and oversampling techniques.
  • Model Building: The ensemble technique is used to train the model, ensuring that the resultant model has good accuracy. The resulting model will be able to predict both fraud and valid transactions.
  • MLOPs: Use the MLOPs framework to build the entire solution lifecycle, from training to deployment and monitoring. This framework sets the rules for model building and ensures the model is accurate and reliable.

With the increasing digitalization and increase in internet adoption, more and more people are going to use digital payment methods and online booking facilities. With the increase in technology development, it will create an easy and faster payment tool. So, it also becomes essential to develop such a tool that prevents fraud and increases customer trust in the company and services. Businesses often look for reliable, accessible, cost-effective solutions. Technology can play a crucial role in it. Building tools and services around the financial product can help the business provide a wide range of services to its customers. This personalized financial product can also be provided, enabling more trust and improving relations between customers and businesses.

Fraud Detection Data Analysis using Python

Let us perform a fundamental Data analysis using Python implementation on a dataset from Kaggle. To download the dataset, click here.

Data Details

The fraud detection dataset contains over 1 million records on which the model will be trained. Below are the dataset details:

Column Description
trans_date_trans_time Transaction DateTime
cc_num Credit Card Number of Customer
merchant Merchant Name
category Category of Merchant
amt Amount of Transaction
first First Name of Credit Card Holder
last Last Name of Credit Card Holder
gender Gender of Credit Card Holder
street Street Address of Credit Card Holder
city City of Credit Card Holder
state State of Credit Card Holder
zip Zip of Credit Card Holder
lat Latitude Location of Credit Card Holder
long Longitude Location of Credit Card Holder
city_pop Credit Card Holder’s City Population
job Job of Credit Card Holder
dob Date of Birth of Credit Card Holder
trans_num Transaction Number
unix_time UNIX Time of transaction
merch_lat Latitude Location of Merchant
merch_long Longitude Location of Merchant
is_fraud Fraud Flag <— Target Class

Step 1 Import Libraries

import random
import calendar
import pandas as pd
import numpy as np
import seaborn as sns
import matplotlib.pyplot as plt
from scipy.stats import norm, skew, ttest_ind
import warnings
warnings.filterwarnings('ignore')

Step 2 Importing Dataset and Inspecting Data

#Read the data from train and test file then converting them to dataframe 
df=pd.read_csv('C:\Decodr\G3\B\FRAUD_DETECTION_IN_IMBALANCED_DATA\data2\Train.csv')
T_df=pd.read_csv('C:\Decodr\G3\B\FRAUD_DETECTION_IN_IMBALANCED_DATA\data2\Test.csv')

#Dataframe shape
df.shape,T_df.shape
((1048575, 22), (555719, 22))

#Checking train and test dataframe info
df.info(),T_df.info()

#Checking null value in train and test dataframe
df.isna().sum(),T_df.isna().sum()

OUTPUT

Output 1 | Fraud Transaction
Output 2 | Fraud Transaction

Step 3 Visualizing the Dataset

#Fraud on the basis of category
sns.countplot(data=df[df['is_fraud_cat'] == "T"], x='category')
plt.xticks(rotation=45)
plt.show()

OUTPUT

Visualising the dataset | Fraud Transaction

Insight
Most frauds occurred in categories of shopping_net and grocery_pos

#Fraud on the basis of gender
sns.countplot(data=df[df['is_fraud_cat']=="T"],x='gender') 
plt.show()

OUTPUT

Insight Output | Fraud Transaction

Insight
Although more cases of fraud happened with female customers, the number is almost the same for both Males and Females.

#Fraud on the basis of state
fig, ax = plt.subplots(figsize=(120,60))
plt.rcParams.update({'font.size': 60})
sns.countplot(data=df[df['is_fraud_cat']=="T"],x='state')
plt.xticks(rotation=45)
for p, label in zip(ax.patches, df["state"].value_counts().index):
    ax.annotate(label, (p.get_x(), p.get_height()+0.15))
plt.title("Number of Credit Card Frauds by State")
plt.show()

OUTPUT

Output 3 | Fraud Transaction

Insight
States OH, TX, and LA report the most significant number of credit card frauds

#Fraud on the basis of City
def randomcolor():
    r = random.random()
    b = random.random()
    g = random.random()
    rgb = [r,g,b]
    return rgb
plt.rcParams.update({'font.size': 20})
df[df['is_fraud_cat']=="T"]["city"].value_counts(sort=True,ascending=False)
.head(10).plot(kind="bar",color=randomcolor())
plt.title("Number of Credit Card Frauds by City")
plt.show()

OUTPUT

 image.png

Insight
Dallas, Houston, and Birmingham report the most frauds city-wise.

#Fraud on the basis of Job
df[df['is_fraud_cat']=="T"]["job"].value_counts(sort=True,ascending=False).head(10)
.plot(kind="bar",color=randomcolor())
plt.title("Number of Credit Card Frauds by Job")
plt.show()

OUTPUT

 image.png

Insight
Most frauds occurred in jobs of quantity surveyor followed by naval architect and materials engineer

#Fraud vs Non Fraud 
plt.figure(figsize=(8,5))
ax = sns.countplot(x="is_fraud", data=df,color=randomcolor())
for p in ax.patches:
     ax.annotate('{:.1f}'.format(p.get_height()), (p.get_x()+0.25, p.get_height()+0.01))
plt.show()

OUTPUT

 image.png

Insight
Only around 6006 entries represent fraud transactions out of nearly 1 million entries; hence, we are looking at an imbalanced dataset.

Step 4. Preprocessing and Feature engineering

data['trans_date_trans_time'] = pd.to_datetime(data['trans_date_trans_time'],
 format='%d-%m-%Y %H:%M')
data['trans_date']=data['trans_date_trans_time'].dt.strftime('%Y-%m-%d')
data['trans_date']=pd.to_datetime(data['trans_date'])
data['dob']=pd.to_datetime(data['dob'],format='%d-%m-%Y')
data["age"] = data["trans_date"]-data["dob"]
data["age"] = data["age"].astype('int64')
data['trans_month'] = pd.DatetimeIndex(data['trans_date']).month
data['trans_year'] = pd.DatetimeIndex(data['trans_date']).year
data['Month_name'] = data['trans_month'].apply(lambda x: calendar.month_abbr[x])
data['latitudinal_distance'] = abs(round(data['merch_lat']-data['lat'],3))
data['longitudinal_distance'] = abs(round(data['merch_long']-data['long'],3))
data.gender=data.gender.apply(lambda x: 1 if x=="M" else 0)
data = data.drop(['cc_num','merchant','first','last','street','zip','trans_num',
'unix_time','trans_date_trans_time','city','lat','long','job','dob','merch_lat',
'merch_long','trans_date','state','Month_name'],axis=1)
data =pd.get_dummies(data,columns=['category'],drop_first=True)

#Performing Undersampling
normal = data[data['is_fraud']==0]
fraud = data[data['is_fraud']==1]
normal_sample=normal.sample(n=len(fraud),random_state=42)
new_data = pd.concat([normal_sample,fraud],ignore_index=True)

End-to-end Model Building Using MS Azure and Airflow

In the above step, I was reading data files locally for visualization, but for the implementation part, we will use cloud services such as MS Azure. I will show
you how I integrated MS Azure with the Airflow tool for data ingestion and model building. In MS Azure, firstly, create a Storage account, and then inside it a container. In this container, store the file. We will build an Airflow pipeline that fetches the data from the container and keeps it at the required location. After this, we will build an end-to-end model, and then it will deploy in-stream cloud where it can be public.

To create a storage account, you must create an Azure account. Follow the below steps:

  • Create a MS Azure account
  • Create a storage account
  • Create a container inside the storage account
  • Once the container is made, upload the file manually or using Airflow DAG.

What is Airflow?

Airflow is an open-source workflow management platform that helps build and monitor the model. It uses the Directed Acyclic Graph (DAG) to define the workflow. Airflow offers several advantages, as described below:

  • Dynamically Defined Workflows: In Airflow, we can define a custom airflow using Python. You can create and modify this workflow easily. This offers flexibility to workflow.
  • Scalable: You can quickly scale Airflow to handle multiple workflows simultaneously by using a distributed architecture.
  • Monitoring and Logging: Airflow offers a user-friendly web interface. Using the web interface, users can monitor and view logs. This helps to troubleshoot the issue quickly.
  • Parallel Execution: Airflow offers the functionality to run the workflow parallelly, which reduces the run time significantly. Also improves the model performance.

In the real world, building a model is not enough; we have to deploy the model into production and monitor the model performance over time and how it interacts with real-world data. We can build an end-to-end machine learning and also watch it using Airflow. In airflow, we can create a workflow and set the dependency in which they will be executed. Workflow status can also be checked in airflow whether it is completed successfully, failed restarted, etc. After the workflow is executed, the logs can be monitored in airflow. This way, we can track our production-ready model. I highly suggest you refer to the Airflow document for more details.

The Workflow

The workflow consists of the following steps:

  • data_upload_operator: – This operator will take the file from local storage and upload it into the Azure blob container.
  • data_download_operator: – This operator will download the file from the azure to local storage.
  • data_preprocessing_operator: – This operator performs the preprocessing on the dataset downloaded from Azure.
  • data_split_operator: – This operator will split the dataset into two parts. In the first part, the model will be trained, and in the second set, the model will be tested.
  • model_training_operator: – This operator trains the model on the dataset.
  • model_evaluation_operator: – This operator is used to evaluate the model performance.
  • model_prediction_operator: – This operator is used to predict the model on a new unseen dataset.

Model Development

As we have above, the different airflow operators. Now, let’s move toward the coding part.

data_upload_operator

from azure.storage.blob import BlobServiceClient
from config.constant import storage_account_key, storage_account_name,
 connection_string, container_name, file_path_up, file_name


def uploadToBlobStorage():
    try:
        blob_service_client = BlobServiceClient.from_connection_string
        (connection_string)
        blob_client = blob_service_client.get_blob_client
        (container = container_name, blob = file_name)

        with open(file_path_up,"rb") as data:
            blob_client.upload_blob(data)
        print("Upload " + file_name + " from local to container " + container_name)

    except Exception as e:
        print(f"An error occurred: {str(e)}")

uploadToBlobStorage()

Above, we have defined the uploadToBlobStorage() method, which will connect with the MS azure storage account. Then, it will take the file from local storage and upload it to the cloud.

data_download_operator

from azure.storage.blob import BlobServiceClient
from config.constant import storage_account_key, storage_account_name,
 connection_string, container_name, blob_name, file_path_down

def downloadFromBlobStorage():
    try:
        # Initialize a BlobServiceClient using the connection string
        blob_service_client = BlobServiceClient.from_connection_string
        (connection_string)

        # Get a BlobClient for the target blob
        blob_client = blob_service_client.get_blob_client
        (container=container_name, blob=blob_name)

        # Download the blob to a local file
        with open(file_path_down, "wb") as data:
            data.write(blob_client.download_blob().readall())

        print(f"Downloaded {blob_name} from {container_name} to {file_path_down}")
    except Exception as e:
        print(f"An error occurred: {str(e)}")


downloadFromBlobStorage()

Here, the downloadFromBlobStorage() method is defined. It will connect with the storage account and download the file. Then, the file will be stored on the local path.

data_preprocessing_operator

from airflow.models import BaseOperator
from airflow.utils.decorators import apply_defaults
import pandas as pd
import calendar

class DataPreprocessingOperator(BaseOperator):
    @apply_defaults
    def __init__(self, preprocessed_data, *args, **kwargs): 
        super(DataPreprocessingOperator, self).__init__(*args, **kwargs)
        self.preprocessed_data = preprocessed_data

    def execute(self, context):
        try:
            # Perform data preprocessing logic here
            # For example, you can clean, transform, or engineer 
            #features in the ingested data
            data = pd.read_csv('data/processed/ingested_data.csv')
            data['trans_date_trans_time'] = pd.to_datetime
            (data['trans_date_trans_time'], format='%d-%m-%Y %H:%M')
            data['trans_date']=data['trans_date_trans_time'].dt.strftime('%Y-%m-%d')
            data['trans_date']=pd.to_datetime(data['trans_date'])
            data['dob']=pd.to_datetime(data['dob'],format='%d-%m-%Y')
            data["age"] = data["trans_date"]-data["dob"]
            data["age"] = data["age"].astype('int64')
            data['trans_month'] = pd.DatetimeIndex(data['trans_date']).month
            data['trans_year'] = pd.DatetimeIndex(data['trans_date']).year
            data['Month_name'] = data['trans_month'].
            apply(lambda x: calendar.month_abbr[x])
            data['latitudinal_distance'] = abs(round(data['merch_lat']-data['lat'],3))
            data['longitudinal_distance'] = abs(round(data['merch_long']-data['long'],3))
            data.gender=data.gender.apply(lambda x: 1 if x=="M" else 0)
            data = data.drop(['cc_num','merchant','first','last','street','zip',
            'trans_num','unix_time','trans_date_trans_time','city','lat','long',
            'job','dob','merch_lat','merch_long','trans_date','state','Month_name'],
            axis=1)
            data =pd.get_dummies(data,columns=['category'],drop_first=True)

            #Performing Undersampling
            normal = data[data['is_fraud']==0]
            fraud = data[data['is_fraud']==1]
            normal_sample=normal.sample(n=len(fraud),random_state=42)
            new_data = pd.concat([normal_sample,fraud],ignore_index=True)

            #Performing Oversampling
            # normal = data[data['is_fraud']==0]
            # fraud = data[data['is_fraud']==1]
            # fraud_sample=fraud.sample(n=len(normal),replace=True,random_state=42)
            # new_data = pd.concat([normal,fraud_sample],ignore_index=True)
            
            # Save the preprocessed data to the output file (e.g., a CSV file)
            new_data.to_csv(self.preprocessed_data, index=False)

        except Exception as e:
            self.log.error(f'Data preprocessing failed: {str(e)}')
            raise e
  • Above, we have changed the datatype and dropped the columns
  • Since the dataset is imbalanced, we have performed undersampling. We have also put the code for oversampling.

model_training_operator

from airflow.models import BaseOperator
from airflow.utils.decorators import apply_defaults
import pandas as pd
from sklearn.ensemble import RandomForestClassifier
import joblib

class ModelTrainingRFCOperator(BaseOperator):
    """
    Custom Apache Airflow operator to train a machine learning model and 
    save it to a file.
    """
    def __init__(self, X_train_file, y_train_file, model_file, *args, **kwargs):
        """
        Initialize the operator.

        :param X_train_file: File path to the features of the training set (X_train).
        :param y_train_file: File path to the labels of the training set (y_train).
        :param model_file: File path to save the trained model.
        """
        super(ModelTrainingRFCOperator, self).__init__(*args, **kwargs)
        self.X_train_file = X_train_file
        self.y_train_file = y_train_file
        self.model_file = model_file

    def execute(self, context):
        self.log.info(f'Training a machine learning model using data from
         {self.X_train_file,self.y_train_file }')

        try:
            X_train = pd.read_csv(self.X_train_file)
            y_train = pd.read_csv(self.y_train_file)
            
            print(X_train.shape)
            print(y_train.shape)
            
            # Initialize and train your machine learning model 
            #(replace with your model class)
            RFC = RandomForestClassifier(n_estimators=100, random_state=0)
            RFC.fit(X_train, y_train)
            # Save the trained model to the provided model_file
            joblib.dump(RFC, self.model_file)

        except Exception as e:
            self.log.error(f'Model training failed: {str(e)}')
            raise e

After preprocessing and data splitting, the next step is to train the model. In code, we have used RandomForestClassifier for model training.

model_evaluation_operator

from airflow.models import BaseOperator
from airflow.utils.decorators import apply_defaults
import pandas as pd
from sklearn.metrics import accuracy_score, classification_report
import joblib

class ModelEvaluationRFCOperator(BaseOperator):
    """
    Custom Apache Airflow operator to evaluate a machine learning model and
     save evaluation results to a file.
    """

    @apply_defaults
    def __init__(self, X_test_file, y_test_file, model_file, output_file, 
    *args, **kwargs):
        """
        Initialize the operator.

        :param X_test_file: File path to the features of the testing set (X_test).
        :param y_test_file: File path to the labels of the testing set (y_test).
        :param model_file: File path to load the trained model.
        :param output_file: File path to save the evaluation results.
        """
        super(ModelEvaluationRFCOperator, self).__init__(*args, **kwargs)
        self.X_test_file = X_test_file
        self.y_test_file = y_test_file
        self.model_file = model_file
        self.output_file = output_file

    def execute(self, context):
        self.log.info(f'Evaluating the machine learning model using data from
         {self.X_test_file,self.y_test_file }')

        # Retrieve the test data from the previous task using XCom
        test_data = context['ti'].xcom_pull(task_ids='data_split_task', key='test_data')

        try:
            """
            Execute the operator to evaluate a machine learning model and 
            save evaluation results to a file.
            """
            # Load the testing data and trained model from the provided files
            X_test = pd.read_csv(self.X_test_file)
            y_test = pd.read_csv(self.y_test_file)
            model = joblib.load(self.model_file)

            # Make predictions using the trained model
            y_pred = model.predict(X_test)

            # Calculate and print evaluation metrics
            accuracy = accuracy_score(y_test, y_pred)
            classification_rep = classification_report
            (y_test, y_pred, target_names=['class_0', 'class_1'])  # Customize labels as needed

            # Save evaluation results to the specified output file
            with open(self.output_file, 'w') as f:
                f.write(f"Accuracy: {accuracy}\n\nClassification Report:\n
                {classification_rep}")

        except Exception as e:
            self.log.error(f'Model evaluation failed: {str(e)}')
            raise e

After model training, we evaluated the model and prepared the classification report. Here, we are checking model accuracy, precision, recall, and F1-score.

model_prediction_operator

from airflow.models import BaseOperator
from airflow.utils.decorators import apply_defaults
import pandas as pd
from sklearn.metrics import accuracy_score, classification_report
import joblib
import calendar

class ModelPredictionOperator(BaseOperator):
    """
    Custom Apache Airflow operator to evaluate a machine learning model and
     save evaluation results to a file.
    """

    @apply_defaults
    def __init__(self, input_file, model_file, output_file, *args, **kwargs):
        """
        Initialize the operator.

        :param X_test_file: File path to the features of the testing set (X_test).
        :param y_test_file: File path to the labels of the testing set (y_test).
        :param model_file: File path to load the trained model.
        :param output_file: File path to save the evaluation results.
        """
        super(ModelPredictionOperator, self).__init__(*args, **kwargs)
        self.input_file = input_file
        self.model_file = model_file
        self.output_file = output_file

    def execute(self, context):
        self.log.info(f'Evaluating the machine learning model using data
         from {self.input_file}')

        try:
            """
            Execute the operator to evaluate a machine learning model and
             save evaluation results to a file.
            """
            # Load the testing data and trained model from the provided files
            new_data = pd.read_csv('data/raw/Test.csv')
            new_data['trans_date_trans_time'] = pd.to_datetime
            (new_data['trans_date_trans_time'], format='%d-%m-%Y %H:%M')
            new_data['trans_date']=new_data['trans_date_trans_time'].
            dt.strftime('%Y-%m-%d')
            new_data['trans_date']=pd.to_datetime(new_data['trans_date'])
            new_data['dob']=pd.to_datetime(new_data['dob'],format='%d-%m-%Y')
            new_data["age"] = new_data["trans_date"]-new_data["dob"]
            new_data["age"] = new_data["age"].astype('int64')
            new_data['trans_month'] = pd.DatetimeIndex(new_data['trans_date']).month
            new_data['trans_year'] = pd.DatetimeIndex(new_data['trans_date']).year
            new_data['Month_name'] = 
            new_data['trans_month'].apply(lambda x: calendar.month_abbr[x])
            new_data['latitudinal_distance'] = 
            abs(round(new_data['merch_lat']-new_data['lat'],3))
            new_data['longitudinal_distance'] =
             abs(round(new_data['merch_long']-new_data['long'],3))
            new_data.gender=new_data.gender.apply(lambda x: 1 if x=="M" else 0)
            new_data = new_data.drop(['cc_num','merchant','first','last','street',
            'zip','trans_num','unix_time','trans_date_trans_time','city','lat',
            'long','job','dob','merch_lat','merch_long','trans_date','state',
            'Month_name'],axis=1)
            new_data =pd.get_dummies(new_data,columns=['category'],drop_first=True)

            X_new = new_data.drop(["is_fraud"],axis=1)
            y_new = new_data["is_fraud"]
            model = joblib.load(self.model_file)

            # Make predictions using the trained model
            y_pred_new = model.predict(X_new)
            print('y_new', y_new)
            print('y_pred_new',y_pred_new)
            # Calculate and print evaluation metrics
            accuracy = accuracy_score(y_new, y_pred_new)
            classification_rep = classification_report
            (y_new, y_pred_new, target_names=['class_0', 'class_1'])  # Customize labels as needed

            # Save evaluation results to the specified output file
            with open(self.output_file, 'w') as f:
                f.write(f"Accuracy: {accuracy}\n\nClassification Report:\n
                {classification_rep}")

        except Exception as e:
            self.log.error(f'Model evaluation failed: {str(e)}')
            raise e

In the prediction operator, we are testing the model on a new dataset, i.e., a test data file. After the prediction, we are preparing a classification report.

Environment Setup and Model deployment in the cloud

Create the virtual environment using python or anaconda.

#Command to create virtual environment
python3 -m venv <virtual_environment_name>

You need to install some Python packages in your environment using the below command.

cd airflow-projects/fraud-prediction
pip install -r requirements.txt

Before running the workflow, you must install the airflow and set up the database.

#Installing airflow
pip install 'apache-airflow==2.7.1' \ --constraint
 "https://raw.githubusercontent.com/apache/airflow/constraints-2.7.1/
 constraints-3.8.txt"
#Setting home path
export AIRFLOW_HOME=/c/Users/[YourUsername]/airflow
#Initialize the database:
airflow db init
#Create an Airflow User
airflow users create --username admin –password admin –firstname admin
 –lastname admin –role Admin –email [email protected]
#Check the created user
airflow users list
#Run the Webserver
#Run the scheduler
airflow scheduler

#If the default port 8080 is in use, change the port by typing:
airflow webserver –port <port number>

We can log in to the Airflow web portal using the username and password created above.

 image.png

Above, we have created different airflow operators that can be run using Airflow DAG. We can trigger the DAG using a single click.

 image.png
image.png

There is a different status through which a workflow is passed before it’s completed successfully or failed. These are shown below:

 image.png

Below are the different operators which we discussed above. We can also monitor the workflow status in real time when it is executed.

 image.png

We can monitor the log of the workflow-triggered DAG in Airflow. Below is the sample.

 image.png

Model deployment in the cloud

After we got the best model, then we deployed the model using the streamlit code. To run this Streamlit app in your local system, using the below command:

# command to run the streamlit app locally
streamlit run streamlit_app.py

The cloud version of an app can also be accessed using the below URL, which can be accessed publicly.

https://fraud-prediction-mlops-d8rcgc2prmv9xapx5ahhhn.streamlit.app/

For end-to-end complete ML implementation code, please click here.

Results

We have experimented with multiple algorithms and compared the performance of each model. The results are as follows:

Models Accuracy Precision Non-Fraud Precision Fraud Recall   Non-Fraud Recall   Fraud F1-Score   Non-Fraud F1-Score   Fraud
AdaBoostClassifier 91.51% 91% 92% 93% 90% 92% 91%
DecisionTreeClassifier 95.51% 96% 95% 95% 95% 96% 95%
GradientBoostingClassifier 95.09% 95% 95% 95% 95% 95% 95%
RandomForestClassifier 95.96% 96% 96% 97% 95% 96% 96%

After using the ensemble learning technique on a highly imbalanced dataset from the above result, we can see that all four models have performed very well with an accuracy of more than 90%. The Random Forest classifier and Decision tree classifier have almost the same accuracy, with a Random Forest being slightly better than a decision tree.

  • Accuracy: Accuracy is the ratio of correct predictions to the total number of predictions.
  • Precision: Precision is how many correct predictions are made in positive classes.
  • Recall: Recall is defined as how many correct optimistic predictions are made from the all-actual positive sample in the dataset.
  • F1-Score: The F1-score measures the accuracy of the model. It is defined as the harmonic mean of precision and Accuracy.

Demo Application

A live demo application of this project using Streamlit. It takes some input features for the product and predicts the valid or fraudulent transaction using our trained models.

Demo Application | Fraud Transaction

Conclusion

Today’s world is digital, and technology has become a part of our lives. There is an increase in online services from books to smartphones and laptops. Anything can be purchased online. So, preventing fraud and implementing a Fraud detection model become essential for every company. Machine Learning can play an essential role for businesses and customers.

  • It increases profit for businesses by identifying fraudulent financial transactions.
  • Helps in maintaining business reputation and increasing customers.
  • ML tools help in providing accessible and better services.
  • Helps in providing good services and building trust with customers.

Frequently Asked Questions

Q1. Which features are crucial in the Fraud detection dataset?

A. The Fraud detection dataset contains many columns that can help determine whether the transaction is valid or fraudulent. This feature includes Amount, Area, Age, Transaction Type, gender, etc.

Q2. What is the purpose of the Fraud detection model?

A. The purpose of the Fraud detection model is to determine whether the transaction is fraud or not. This helps businesses to prevent fraud, gain customer trust, and increase the company’s profit.

Q3. What is a fraud detection model?

A. The Fraud detection model is a Machine Learning model trained on more than ten lakh records of past customer transaction data to determine whether the transaction is valid. This helps to predict whether the transaction is valid or not in real-time.

Q4. How accurately does the model predict the false transaction?

A. Fraud detection is predicted based on some factors, such as data type and quality. If the model is trained on more parameters, it tends to predict the price more accurately.

Q5. How fraud detection model is helpful to business?

A. Businesses and financial institutions can use such technology or tools to prevent fraud and increase profit. This offers them a competitive advantage over companies, helping them to attract more customers. Businesses can also build such financial tools and provide better services to customers.

The media shown in this article is not owned by Analytics Vidhya and is used at the Author’s discretion. 

Ashish Kumar 17 Nov 2023

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