ASIC has released its inaugural report into the use and adoption of AI by financial services and credit licensees.
The report highlights the urgent need for strong governance frameworks to keep pace with the rapid integration of AI technologies. This need arises from findings showing that a majority of licensees plan to increase their use of AI, which could significantly influence consumer interactions and overall market dynamics.
ASIC Chairman Joe Longo has highlighted the importance of updating governance structures to align with the growing deployment of AI. The report highlights that while current AI applications primarily support human decision-making and operational efficiency, approximately 60% of surveyed licensees intend to enhance their AI capabilities. Such escalation in AI use requires strict governance to mitigate risks associated with AI, such as misinformation, consumer manipulation, and potential data breaches.
Despite the cautious approach currently being taken by licensees in their AI applications, the review revealed some concerning shortcomings. Nearly half of licensees do not have policies addressing consumer fairness or bias, and an even smaller percentage have measures governing disclosure of AI use to consumers. This oversight could lead to a governance vacuum, especially as competitive pressures push for faster adoption of AI without corresponding updates to governance frameworks.
Joe Longo’s comment was clear, highlighting the double-edged nature of AI in financial services: “When it comes to balancing innovation with the responsible, safe and ethical use of AI , there is a risk of a governance gap, which is likely to widen if AI adoption outpaces governance in response to competitive pressures.
Additionally, Longo emphasized that licensees should not simply wait for new AI regulations, but proactively ensure that their current practices and obligations are sufficient to manage the evolving landscape. He advocated for comprehensive due diligence, particularly in managing risks related to third-party AI providers, to protect consumer interests and maintain market integrity.
ASIC’s continued commitment to monitoring the use of AI aligns with its strategic objectives to address poor AI implementations, as outlined in its Business Plan. The regulator will remain vigilant, ready to enforce compliance as necessary to protect consumers and maintain the safety and soundness of the financial system.
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