Academy & Industry Research Collaboration Center (AIRCC)

Volume 10, Number 15, November 2020

A New Framework of Feature Engineering for Machine Learning in Financial Fraud Detection


Chie Ikeda, Karim Ouazzane and Qicheng Yu, London Metropolitan University, UK


Financial fraud activities have soared despite the advancement of fraud detection models empowered by machine learning (ML). To address this issue, we propose a new framework of feature engineering for ML models. The framework consists of feature creation that combines feature aggregation and feature transformation, and feature selection that accommodates a variety of ML algorithms. To illustrate the effectiveness of the framework, we conduct an experiment using an actual financial transaction dataset and show that the framework significantly improves the performance of ML fraud detection models. Specifically, all the ML models complemented by a feature set generated from our framework surpass the same models without such a feature set by nearly 40% on the F1-measure and 20% on the Area Under the Curve (AUC) value.


Financial Fraud Detection, Feature Engineering, Feature Creation, Feature Selection, Machine Learning.