Kolmogorov Arnold Networks in Fraud Detection: Bridging the Gap Between Theory and Practice

Kolmogorov Arnold Networks (KAN) are highly efficient in inference and can handle complex patterns once trained, making them desirable for production environments and ensuring a fast service experience in the finance and electronic shopping industries. However, we found that KAN, in general, is not suitable for fraud detection problems. We also discovered a quick method to determine whether a problem is solvable by KAN: if the data can be effectively separated using spline interpolation with varying intervals after applying Principal Component Analysis (PCA) to reduce the data dimensions to two, KAN can outperform most machine learning algorithms. Otherwise, it indicates KAN may not solve the problem effectively compared to other machine learning algorithms. We also propose a heuristic approach for selecting the appropriate hyperparameters for KAN to significantly accelerate training time compared to grid search hyperparameter tuning, which usually takes a month for a comprehensive grid search. Specifically, the width parameter should generally follow a pyramid structure, allowing efficient spline mixing, and k should be fixed at 15, with the grid number fixed at 5. This streamlined approach minimizes the number of evaluations required, significantly speeding up the hyperparameter tuning process while still achieving robust performance metrics.