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| Main Authors: | , , , , , , , |
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| Format: | Preprint |
| Published: |
2025
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2507.19402 |
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| _version_ | 1866918104395677696 |
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| author | Cardaioli, Matteo Marangoni, Luca Martini, Giada Mazzolin, Francesco Pajola, Luca Parodi, Andrea Ferretto Saitta, Alessandra Vernillo, Maria Chiara |
| author_facet | Cardaioli, Matteo Marangoni, Luca Martini, Giada Mazzolin, Francesco Pajola, Luca Parodi, Andrea Ferretto Saitta, Alessandra Vernillo, Maria Chiara |
| contents | The increasing complexity and volume of financial transactions pose significant challenges to traditional fraud detection systems. This technical report investigates and compares the efficacy of classical, quantum, and quantum-hybrid machine learning models for the binary classification of fraudulent financial activities.
As of our methodology, first, we develop a comprehensive behavioural feature engineering framework to transform raw transactional data into a rich, descriptive feature set. Second, we implement and evaluate a range of models on the IBM Anti-Money Laundering (AML) dataset. The classical baseline models include Logistic Regression, Decision Tree, Random Forest, and XGBoost. These are compared against three hybrid classic quantum algorithms architectures: a Quantum Support Vector Machine (QSVM), a Variational Quantum Classifier (VQC), and a Hybrid Quantum Neural Network (HQNN).
Furthermore, we propose Fraud Detection for Quantum Computing (FD4QC), a practical, API-driven system architecture designed for real-world deployment, featuring a classical-first, quantum-enhanced philosophy with robust fallback mechanisms.
Our results demonstrate that classical tree-based models, particularly \textit{Random Forest}, significantly outperform the quantum counterparts in the current setup, achieving high accuracy (\(97.34\%\)) and F-measure (\(86.95\%\)). Among the quantum models, \textbf{QSVM} shows the most promise, delivering high precision (\(77.15\%\)) and a low false-positive rate (\(1.36\%\)), albeit with lower recall and significant computational overhead.
This report provides a benchmark for a real-world financial application, highlights the current limitations of quantum machine learning in this domain, and outlines promising directions for future research. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2507_19402 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | FD4QC: Application of Classical and Quantum-Hybrid Machine Learning for Financial Fraud Detection A Technical Report Cardaioli, Matteo Marangoni, Luca Martini, Giada Mazzolin, Francesco Pajola, Luca Parodi, Andrea Ferretto Saitta, Alessandra Vernillo, Maria Chiara Machine Learning Computational Engineering, Finance, and Science The increasing complexity and volume of financial transactions pose significant challenges to traditional fraud detection systems. This technical report investigates and compares the efficacy of classical, quantum, and quantum-hybrid machine learning models for the binary classification of fraudulent financial activities. As of our methodology, first, we develop a comprehensive behavioural feature engineering framework to transform raw transactional data into a rich, descriptive feature set. Second, we implement and evaluate a range of models on the IBM Anti-Money Laundering (AML) dataset. The classical baseline models include Logistic Regression, Decision Tree, Random Forest, and XGBoost. These are compared against three hybrid classic quantum algorithms architectures: a Quantum Support Vector Machine (QSVM), a Variational Quantum Classifier (VQC), and a Hybrid Quantum Neural Network (HQNN). Furthermore, we propose Fraud Detection for Quantum Computing (FD4QC), a practical, API-driven system architecture designed for real-world deployment, featuring a classical-first, quantum-enhanced philosophy with robust fallback mechanisms. Our results demonstrate that classical tree-based models, particularly \textit{Random Forest}, significantly outperform the quantum counterparts in the current setup, achieving high accuracy (\(97.34\%\)) and F-measure (\(86.95\%\)). Among the quantum models, \textbf{QSVM} shows the most promise, delivering high precision (\(77.15\%\)) and a low false-positive rate (\(1.36\%\)), albeit with lower recall and significant computational overhead. This report provides a benchmark for a real-world financial application, highlights the current limitations of quantum machine learning in this domain, and outlines promising directions for future research. |
| title | FD4QC: Application of Classical and Quantum-Hybrid Machine Learning for Financial Fraud Detection A Technical Report |
| topic | Machine Learning Computational Engineering, Finance, and Science |
| url | https://arxiv.org/abs/2507.19402 |