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SOM approach for clustering customers using credit card transactions

SOM approach for clustering customers using credit card transactions The purpose of this paper is to generate customer clusters using self-organizing map (SOM) approach, a machine learning technique with a big data set of credit card consumptions. The authors aim to use the consumption patterns of the customers in a period of three months deducted from the credit card transactions, specifically the consumption categories (e.g. food, entertainment, etc.).Design/methodology/approachThe authors use a big data set of almost 40,000 credit card transactions to cluster customers. To deal with the size of the data set and the eliminated the required parametric assumptions the authors use a machine learning technique, SOMs. The variables used are grouped into three as demographical variables, categorical consumption variables and summary consumption variables. The variables are first converted to factors using principal component analysis. Then, the number of clusters is specified by k-means clustering trials. Then, clustering with SOM is conducted by only including the demographical variables and all variables. Then, a comparison is made and the significance of the variables is examined by analysis of variance.FindingsThe appropriate number of clusters is found to be 8 using k-means clusters. Then, the differences in categorical consumption levels are investigated between the clusters. However, they have been found to be insignificant, whereas the summary consumption variables are found to be significant between the clusters, as well as the demographical variables.Originality/valueThe originality of the study is to incorporate the credit card consumption variables of customers to cluster the bank customers. The authors use a big data set and dealt with it with a machine learning technique to deduct the consumption patterns to generate the clusters. Credit card transactions generate a vast amount of data to deduce valuable information. It is mainly used to detect fraud in the literature. To the best of the authors’ knowledge, consumption patterns obtained from credit card transaction are first used for clustering the customers in this study. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Intelligent Computing and Cybernetics Emerald Publishing

SOM approach for clustering customers using credit card transactions

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1756-378X
DOI
10.1108/ijicc-11-2018-0157
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to generate customer clusters using self-organizing map (SOM) approach, a machine learning technique with a big data set of credit card consumptions. The authors aim to use the consumption patterns of the customers in a period of three months deducted from the credit card transactions, specifically the consumption categories (e.g. food, entertainment, etc.).Design/methodology/approachThe authors use a big data set of almost 40,000 credit card transactions to cluster customers. To deal with the size of the data set and the eliminated the required parametric assumptions the authors use a machine learning technique, SOMs. The variables used are grouped into three as demographical variables, categorical consumption variables and summary consumption variables. The variables are first converted to factors using principal component analysis. Then, the number of clusters is specified by k-means clustering trials. Then, clustering with SOM is conducted by only including the demographical variables and all variables. Then, a comparison is made and the significance of the variables is examined by analysis of variance.FindingsThe appropriate number of clusters is found to be 8 using k-means clusters. Then, the differences in categorical consumption levels are investigated between the clusters. However, they have been found to be insignificant, whereas the summary consumption variables are found to be significant between the clusters, as well as the demographical variables.Originality/valueThe originality of the study is to incorporate the credit card consumption variables of customers to cluster the bank customers. The authors use a big data set and dealt with it with a machine learning technique to deduct the consumption patterns to generate the clusters. Credit card transactions generate a vast amount of data to deduce valuable information. It is mainly used to detect fraud in the literature. To the best of the authors’ knowledge, consumption patterns obtained from credit card transaction are first used for clustering the customers in this study.

Journal

International Journal of Intelligent Computing and CyberneticsEmerald Publishing

Published: Aug 16, 2019

Keywords: PCA; Clustering; Self-organizing maps; k-means; Credit card transactions

References