Watchdog pushes financial literacy to counter AI boom

Australians need to become more financially savvy or risk being exploited by an explosion of AI scams and financial product advertising, the regulator warns.

Amid the breathtaking pace of technological change, Australia is unprepared for the disruption that artificial intelligence will bring, Australian Securities and Investments Commission chairman Joe Longo said.

The financial watchdog is closely monitoring the increasingly widespread use of artificial intelligence agents that can perform tasks independently with minimal human input.

In its report on issues to 2026, ASIC warned that while there is a potential productivity benefit for businesses, the rapid adoption of agency AI could increase harm to consumers by exploiting things like behavioral biases and increasing the threat of fraud.

Keeping up with technological change is not only a significant challenge for consumers and investors, but also poses an “existential risk” for the regulator, Mr. Longo said.

“ASIC has invested in AI capability, data literacy and data-informed decision-making… but I think we need to invest much more,” he told AAP.

Australia needed to have a national conversation about strengthening financial literacy, rather than taking a whack-a-mole approach by focusing on greater regulation to address technologically driven threats as they emerge.

ASIC planned to continue investing in consumer education programs such as Moneysmart.

“Prevention is always better than cure,” said Mr Longo, whose term as ASIC chairman ends on May 31.

“The whole technology literacy issue is tied to financial literacy because we are seeing a convergence.

“A lot of financial products are promoted through these technologies or platforms, so I worry that we as a community have not invested enough in our level of understanding of these issues.”

Australian Competition and Consumer Commission recently warned Representatives of artificial intelligence have raised new questions, new risks and regulatory challenges for authorities.

These include determining who will be responsible for misleading advertising as AI systems increasingly make decisions and representations on behalf of a business.

The government has allocated an extra $120 million over four years in 2024 to improve ASIC’s data capacity and cybersecurity and modernize its trading registers, but Mr Longo said more funding was still needed.

“Frankly, I think we need to have more generous resources in this area,” Mr. Longo said.

“I have been calling for more funding for our digital transformation for some time.”

Artificial intelligence has helped fuel a boom in ads promoting dubious investments in financial products.

ASIC is already discussing reform of the law to restrict cold calling and lead generation, which led to customers investing in the collapsed Shield and First Guardian parent funds.

“But in general we are talking about advertising that is not regulated,” Mr. Longo said.

“So we would like to consider whether this type of advertising should be restricted in some way, or whether it should be accompanied by warnings that you should seek appropriate financial advice from a licensed financial advisor before proceeding.

“We have seen too many examples where people lost money when they invested their life savings (for example, to get higher returns).”

Other key issues ASIC is keeping an eye on in 2026 include some familiar concerns such as cyber attacks, the increasing exposure of mom-and-pop investors to private credit markets and operational failures by super funds, such as delays in processing death benefit claims.

But some pressing issues also keep the regulator up at night.

ASIC said it would monitor the banking industry to ensure lenders who feel their margins are being squeezed by increased competition do not resort to tactics that harm consumers.

“Competitive dynamics in Australia may encourage lax credit assessments, larger or unsuitable loans, product changes for lower-margin customers and aggressive marketing that directs consumers to higher-risk products,” ASIC said.

Australia’s Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national news channel and has been providing accurate, reliable and fast-paced news content to the media industry, government and corporate sector for 85 years. We inform Australia.