A financial institution plans to implement an AI-powered credit scoring system to evaluate loan applications based on applicants' income, employment history, repayment records, and other financial information. The institution believes that AI can improve decision-making accuracy, reduce processing time, and minimise human bias. However, concerns arise when several applicants with similar financial profiles receive different credit scores, particularly those from lower-income communities or certain demographic groups. Further investigation suggests that historical lending data and some variables used by the AI system may contribute to unfair outcomes.

Critically discuss the ethical implications, fairness, and potential biases associated with implementing this AI-powered credit scoring system. In your discussion, explain how AI is used in credit scoring and why fairness is important, identify and illustrate TWO types of bias, examine the consequences for individuals, financial institutions, and society, and evaluate TWO strategies for mitigating bias, including ONE limitation of each strategy. Support your arguments with relevant examples.