Mitigating bias in financial decision systems through responsible machine learning

Kambhampati, Aditya (2025) Mitigating bias in financial decision systems through responsible machine learning. World Journal of Advanced Engineering Technology and Sciences, 15 (2). pp. 1415-1421. ISSN 2582-8266

Algorithmic bias in financial decision systems perpetuates and sometimes amplifies societal inequities, affecting millions of consumers through discriminatory lending practices, inequitable pricing, and exclusionary fraud detection. Minority borrowers face interest rate premiums that collectively cost communities hundreds of millions of dollars annually, while technological barriers to financial inclusion affect tens of millions of "credit invisible" Americans. This article provides a comprehensive framework for detecting, measuring, and mitigating algorithmic bias across the machine learning development lifecycle in financial services. Through examination of statistical fairness metrics, technical mitigation strategies, feature engineering approaches, and regulatory considerations, the article demonstrates that financial institutions can significantly reduce discriminatory outcomes while maintaining model performance. Pre-processing techniques like reweighing and data transformation, in-processing methods such as adversarial debiasing, and post-processing adjustments including threshold optimization provide complementary strategies that together constitute effective bias mitigation. Feature selection emerges as particularly impactful, with proxy variable detection and alternative data integration expanding opportunities for underserved populations. As regulatory expectations evolve toward mandatory fairness testing and explainability requirements, financial institutions implementing comprehensive fairness frameworks not only reduce compliance risks but also expand market opportunities through more inclusive algorithmic systems.