Consumer Credit Risk Analysis using Data Mining Clustering and Business Intelligence Solutions

In the recent years, the scale of online transaction has increased considerably. Subsequently, this has also increased the number of fraud cases, causing billions of dollars losses each year worldwide. Therefore, it has become mandatory to implement mechanisms that are able to assist in fraud detection. In this work, the use of Ensemble Genetic Algorithm is proposed to identify frauds in electronic transactions, more specifically in online credit card operations. A case study, using the dataset containing transactions made by credit cards in September 2013 by European cardholders, is used. This dataset presents transactions that occurred in two days, where we have 492 frauds out of 284,807 transactions. The presented algorithm achieves good performance in fraud detection as compared to the other machine learning algorithms. The results show that the proposed algorithm achieved good classification effectiveness in all tested instances.

A Judgment-Based Risk Assessment Framework for Consumer Loans

Credit to personal consumption is an important activity of the financial system and crucial to the socioeconomic development of a country. It is important, therefore, that the methods and techniques used to evaluate consumer credit risk be as efficient and informative as possible, in order to strengthen decisions to approve or reject credit and promote sustainable economic growth. This study aims to create a multiple criteria expert system which integrates cognitive maps and the measuring attractiveness by a categorical-based evaluation technique (MACBETH) to create a complementary framework for consumer credit risk assessment. The results show that this integrated approach allows the evaluation process of consumer credit risk to be more informed and transparent, providing value for the evaluation processes of this type of credit application as a result of the privileged contact established with a panel of credit analysts. Advantages, limitations, and managerial implications are also discussed.