Design a Real-Time Fraud Detection System

Functional Requirements:

• Real-Time Detection: The system must identify fraudulent transactions in real-time to prevent financial losses.
• Accuracy: High accuracy in detecting fraudulent activities with minimal false positives and negatives.
• Scalability: Ability to handle increasing transaction volumes without degradation in performance.
• Adaptability: The system should adapt to new fraud patterns and techniques over time.
• Alerting Mechanism: Generate alerts for detected frauds and notify relevant stakeholders.
• User Interface: Provide a dashboard for monitoring and managing fraud detection activities.
• Integration: Seamless integration with existing payment processing systems and databases.
• Logging and Auditing: Maintain logs of all transactions and detection activities for auditing purposes.

Non-Functional Requirements:

• Performance: The system should process transactions with minimal latency to ensure real-time detection.
• Reliability: High availability and fault tolerance to ensure continuous operation.
• Security: Ensure data privacy and protection against unauthorized access.
• Compliance: Adhere to industry standards and regulations for financial transactions.
• Maintainability: Easy to update and maintain with minimal downtime.
• Usability: Intuitive interface for users to interact with the system efficiently.
• Cost-Effectiveness: Optimize resource usage to minimize operational costs.

Constraints:

• Data Privacy: Must comply with data protection laws and regulations.
• Resource Limitations: Limited computational resources and budget constraints.
• Latency Requirements: Must meet strict latency requirements for real-time processing.
• Integration Constraints: Compatibility with existing systems and technologies.
• Scalability Limits: Must scale within predefined limits to avoid over-provisioning.