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Streaming Architecture by Ellen Friedman, Ted Dunning

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Chapter 6. Fraud Detection with Streaming Data

Rapid detection of credit card fraud is just one of many examples from the financial sector where streaming data is an important part of the solution. In this chapter, we’ll show how stream-based architecture can provide a better architectural foundation for credit card fraud detection and, if designed in a clever way, also provide benefits for projects beyond the first specific goal for fraud protection.

Thinking of the example in this way, we have two major goals in our design:

Goal 1

When a customer uses a credit card to do a transaction, the vendor needs a fast response to the question, “Is it fraud?”

Goal 2

We need to keep a history of fraud decisions the system has made. That history of decisions should be available to other applications and services within the organization as well as updating the database within the fraud system.

Card Velocity

For our credit card example, in order to highlight the architectural aspects, we take a highly simplified view of how to actually detect fraud. Specifically, we’ll look at a property known as card velocity and use it as an indicator of the likelihood of fraudulent activity. The idea behind card velocity is quite straightforward. Suppose you see that a credit card is used at a point of sale (POS) in London, and three minutes later, the same card is used at a POS in Sydney, Australia. What do you conclude? Until someone invents an effective molecular transporter or time machine, ...

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