Framework for Adaptive Sequential Pattern Recognition Applied on Credit Card Fraud Detection in the Online Games Industry

Online credit card fraud presents a significant challenge in the field of eCommerce. In 2012 alone, the total loss due to credit card fraud in the US amounted to $ 54 billion. Especially online games merchants have difficulties applying standard fraud detection algorithms to achieve timely and accurate detection. This paper describes the special constrains of this domain and highlights the reasons why conventional algorithms are not quite effective to deal with this problem. Our suggested solution for the problem originates from the fields of feature construction joined with the field of temporal sequence data mining. We present feature construction techniques, which are able to create discriminative features based on a sequence of transaction and are able to incorporate the time into the classification process. In addition to that, a framework is presented that allows for an automated and adaptive change of features in case the underlying pattern is changing.