Imbalanced Datasets in Data Science: Understanding Challenges and Practical Solutions

Size doesn't always translate to good data in the science data When it comes to data science, the size of your data does not always equal good data. When students and practitioners are working on real machine learning projects, a typical problem is training data that is imbalanced. What is imbalanced data?

Consider a banking dataset with 10,000 transactions, out of which 9,800 are valid, and only 200 are fake. Despite the high information, the fraud class is only a small component of the total data. This class imbalance will be very hard for a machine learning model to predict correctly the minority class.

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What Are Imbalanced Datasets?

What is an imbalanced dataset? A dataset with unequal proportions of classes within it.

Consider a simple customer churn example:

9,000 customers did not leave the company.

1,000 customers left the company.

Why Do Imbalanced Datasets Matter?

Uneven class frequencies can have an impact on the classification model's ability to learn. For instance, if it is presented with thousands of instances of one class compared to only a handful of instances of another class, it can become more accustomed to the majority class.

For instance, if 98% of transactions are legitimate and 2% fraudulent, any model that simply predicts all transactions as legitimate would be 98% accurate. It would have the right accuracy but it would not catch fraudulent transactions.

Therefore, accuracy might not be the best metric to evaluate models all the time.

Detecting this problem as part of their education in data science gives students the expertise to go beyond the "how to" of model creation and to think more critically about evaluating models.

Common Examples of Imbalanced Datasets

Imbalanced datasets appear across many industries.

1. Fraud Detection

While there may be millions of legitimate transactions and relatively few fraudulent transactions, the latter is the smaller class we want to identify using machine learning.

2. Medical Diagnosis

One particular medical condition Condition A may have far fewer cases than healthy patients in a dataset. Models have to be able to distinguish these Minority cases.

3. Spam Detection

Some email systems have a large number of legitimate messages with respect to spam messages. The model needs to be able to tell the difference between the two.

4. Customer Churn

A business may have a lot of active customers and a small number of churned customers. Knowing which of your customers are most likely to leave can be useful.

5. Cybersecurity

Security datasets may consist of a large amount of benign activity as compared to malicious activity. As such, detecting an anomalous or malicious act would be a relevant classification problem.

How Can Data Scientists Handle Imbalanced Datasets?

Here are some options for you to consider. The most appropriate depends on the dataset, business objective and machine learning method in use.

1. Oversampling

The sample size of the minority class can be increased.

One of the more popular techniques is called SMOTE (Synthetic Minority Oversampling Technique). It generates new and synthetic examples of the minority class based on existing observations rather than blindly copying the existing ones.

It may assist in offering the model additional information regarding the minority class.

2. Undersampling

Undersampling is the technique where you downsample the number of observations from the bigger class.

Take a dataset of 10,000 majority-class records and 1,000 minority-class records. A data scientist can downsample the majority class in order to make the training data more balanced.

Though, as other control techniques, this one can also lead to the loss of some useful data. So, it should be carefully optimized.

3. Combining Oversampling and Undersampling

In some projects, data scientists use both techniques. A part of the majority class is balanced out while the other minority class gets boosted up.

This allows a more balanced and manageable training set.

4. Choosing Appropriate Evaluation Metrics

Nightingale When dealing with an imbalanced dataset, the accuracy alone is not a good measure.

Other useful metrics include:

Precision

Recall

F1-score

ROC-AUC

Precision-Recall AUC

Confusion matrix

In some applications, this may be critical, since a missed minority-class event can be very costly.