Australian regulator to review banks’ customer-facing AI use

Australia’s corporate regulator will examine how banks are using, or proposing to use, artificial intelligence in their interactions with customers.

The Australian Securities and Investments Commission (ASIC) outlined the work in a letter setting out its five priorities for the banking sector in 2026–27 corporate plan.

The document is intended to help banks determine their resource needs and address issues that their boards and executives are expected to consider during the year.

In the letter, the regulator said: “Australia’s banking sector plays a vital role in Australia’s economy and the daily lives of consumers and businesses. The sector operates in an environment characterised by strong competition, rapid technological change and increasing geopolitical uncertainty.”

The watchdog said its work would remain focused on how banking activities affect consumers.

The planned AI review will examine new and proposed applications across the banking sector, including their effects on customers.

ASIC will work with the Australian Prudential Regulation Authority (APRA) to reduce overlap with related work on AI risks.

ASIC’s Report 798, Beware the gap: Governance arrangements in the face of AI innovation, published in October 2024, said financial services firms were adopting AI while governance and risk assessment were not keeping pace.

The report also identified gaps in the assessment of consumer risks.

Separately, ASIC will begin a review of lender conduct.

The work is expected to examine changes made by banks in 2024 to short-term variable remuneration for proprietary lenders, lenders’ use of referrers, and lenders’ supervision of brokers.

Banks that provide buy now, pay later products could also fall within a compliance review of buy now, pay later providers’ obligations under credit laws.

That review is expected to begin in early 2027.

The regulator plans to finish its review of debt buyers and contingent collectors, including lenders’ oversight of their conduct, and release the findings in the third quarter of 2026–27.

It said banks should compare their own practices with the findings.

ASIC also asked banks to reassess their hardship arrangements using the findings in Reports 782 and 815, and to identify any changes that may be needed.

The regulator will work with Treasury, the Australian Competition and Consumer Commission, and the Australian Communications and Media Authority on the Scams Prevention Framework.

The framework is scheduled to begin in March 2027.