An Explainable AI-based Fraud Detection System Using Recursive Feature Elimination and Waterwheel Plant Optimization for Financial Transactions
Received: 13 July 2025 | Revised: 25 July 2025, 5 August 2025, and 21 August 2025 | Accepted: 26 August 2025 | Online: 6 October 2025
Corresponding author: Hafis Hajiyev
Abstract
Fraudulent transactions and the methods to detect them are an an important issue for financial organizations globally. The requirement for progressive fraud detection systems to protect properties and maintain customer trust is predominant for financial organizations, but particular factors make the development of efficient and effective fraud detection models a challenge. Deep Learning (DL) has greatly improved fraud detection accuracy by detecting intrinsic patterns, whereas interpretability techniques improve transparency and build trust by making predictions understandable to experts. This study presents a Fraud Detection System using Recursive Feature Elimination and Waterwheel Plant Optimization (FDS-RFEWPO) model for financial transactions. The aim is to perform a comprehensive evaluation of fraud detection in high-dimensional financial transactions using advanced techniques. Initially, the FDS-RFEWPO technique follows min-max-based data pre-processing to normalize the input data. For the feature selection process, the FDS-RFEWPO model employs the Recursive Feature Elimination (RFE) technique to select the most relevant features from the dataset. Furthermore, the Variational Autoencoder/Wasserstein Autoencoder (VAE/WAE) model is employed for fraud detection and classification. To further enhance model performance, the Waterwheel Plant Optimization (WPO) technique is employed for hyperparameter tuning, ensuring the selection of optimal parameters that contribute to improved accuracy. Finally, the Explainable Artificial Intelligence (XAI) technique applies Local Interpretable Model-Agnostic Explanations (LIME) to improve the transparency, interpretability, and trustworthiness of Artificial Intelligence (AI) methods by making their decision-making procedures clear to humans. To evaluate the performance of the FDS-RFEWPO model, a comprehensive experimental analysis is conducted using a financial fraud detection dataset. The comparison study of the FDS-RFEWPO model demonstrates a superior accuracy of 97.41% over existing techniques.
Keywords:
Explainable Artificial Intelligence (XAI), fraud detection, Recursive Feature Elimination (RFE), Waterwheel Plant Optimization (WPO), financial transactionsDownloads
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Copyright (c) 2025 Hafis Hajiyev, Emil Hajiyev, Mirzobek Avezov, Samariddin Makhmudov, Dilora Abdukhalikova, E. Laxmi Lydia
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