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Predicting credit card customer churn in banks using data mining

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  • Dudyala Anil Kumar
  • V. Ravi
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    Abstract

    In this paper, we solve the customer credit card churn prediction via data mining. We developed an ensemble system incorporating majority voting and involving Multilayer Perceptron (MLP), Logistic Regression (LR), decision trees (J48), Random Forest (RF), Radial Basis Function (RBF) network and Support Vector Machine (SVM) as the constituents. The dataset was taken from the Business Intelligence Cup organised by the University of Chile in 2004. Since it is a highly unbalanced dataset with 93% loyal and 7% churned customers, we employed (1) undersampling, (2) oversampling, (3) a combination of undersampling and oversampling and (4) the Synthetic Minority Oversampling Technique (SMOTE) for balancing it. Furthermore, tenfold cross-validation was employed. The results indicated that SMOTE achieved good overall accuracy. Also, SMOTE and a combination of undersampling and oversampling improved the sensitivity and overall accuracy in majority voting. In addition, the Classification and Regression Tree (CART) was used for the purpose of feature selection. The reduced feature set was fed to the classifiers mentioned above. Thus, this paper outlines the most important predictor variables in solving the credit card churn prediction problem. Moreover, the rules generated by decision tree J48 act as an early warning expert system.

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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Data Analysis Techniques and Strategies.

    Volume (Year): 1 (2008)
    Issue (Month): 1 ()
    Pages: 4-28

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    Handle: RePEc:ids:injdan:v:1:y:2008:i:1:p:4-28

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    Web page: http://www.inderscience.com/browse/index.php?journalID=282

    Related research

    Keywords: credit cards; credit card churn; data mining; churn prediction; multilayer perceptron; MLP; logistic regression; decision tree; random forest; radial basis function; RBF neural networks; support vector machine; SVM; synthetic minority oversampling technique; SMOTE; undersampling; oversampling; expert systems.;

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    Cited by:
    1. Owen P. Hall Jr. & Darrol J. Stanley, 2012. "A comparative modelling analysis of firm performance," International Journal of Data Analysis Techniques and Strategies, Inderscience Enterprises Ltd, vol. 4(1), pages 43-56.
    2. Verbeke, Wouter & Dejaeger, Karel & Martens, David & Hur, Joon & Baesens, Bart, 2012. "New insights into churn prediction in the telecommunication sector: A profit driven data mining approach," European Journal of Operational Research, Elsevier, vol. 218(1), pages 211-229.
    3. Vera Miguéis & Dirk Poel & Ana Camanho & João Falcão e Cunha, 2012. "Predicting partial customer churn using Markov for discrimination for modeling first purchase sequences," Advances in Data Analysis and Classification, Springer, vol. 6(4), pages 337-353, December.

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