ASIC Chair to banks: the hammer comes down if AI “leaves your customers bleeding”

The corporate regulator has given banks the go ahead for embedding AI deeper into their tech stacks, but drew a line in the sand of consumer protection.

In a keynote speech at the Australian Banking Association conference in Sydney on Wednesday, ASIC Chair Joe Longo told bank chiefs — and the fintechs that sell to them — that the regulator wasn’t going to actively slow down or restrict AI use in the financial sector, but pointedly warned “cutting-edge technology can’t leave your customers bleeding”.

“We’ve already seen that customer trust in AI and its potential to improve customer service is eroding,” Longo said. “If banks get this wrong, we’re likely to see a significant setback in AI legitimacy and trust.”

Only 36 per cent of Australians say they trust AI, according to research from KPMG and RepTrak, leaving the re-elected government — and its new science and industry minister — the task of setting a regulatory framework that can build trust in the slippery technology.

Meanwhile, policy boffins desperate for a way of pulling Australia’s productivity back from the brink are told time and again that AI is the solution.

“Ultimately, we don’t want regulation to have a chilling effect on AI innovation and the potential benefits that it would have for all of us,” Longo told the Australian Banking Association conference this week.

Still, he noted an ASIC report from last October that found “a number of gaps” in how licensed financial services were assessing consumer risk of their AI implementations.

“For some licensees, their governance arrangements lagged well behind their AI use.”

AI products that improve consumer protection or service speed are unlikely to be blocked, but these kinds of governance gaps will draw regulatory heat.

Longo said ASIC would “kick the tyres a bit” of the existing regulatory framework first and it’s clear he’s looking for test cases.

“AI innovation has to actually make your customers’ lives better and not just be a marketing or data-gathering tool,” he said.

“And that requires careful attention to ethics when introducing these systems to ensure customers actually benefit over the long term.”

ASIC’s recent $8 million penalty against the local operator of crypto exchange Kraken shows the regulator is willing to move fast when it believes customers are at risk.

In 2023, Westpac led a $28 million Series B in Sydney‑based lending‑analysis scale‑up Rich Data Co, showing the major banks have appetite for AI suppliers that lift customer outcomes and comply with existing rules.