An Influence Diagram Model for Detecting Credit Card Fraud

A hybrid influence diagram is a compact graphical and numerical representation of a decision problem under uncertainty that includes both discrete and continuous chance variables. These models can be used by businesses to detect online credit card transactions that may be fraudulent. By creating decision rules based on merchandise value and additional address and product characteristics, the influence diagram model can be used to develop policies that help businesses decide when to investigate an order’s legitimacy. The influence diagram establishes guidelines that minimize the sum of the costs of lost merchandise and order investigation.