She said financial firms were blitzing consumers with marketing, often targeted them through the use of technology, that was delivering poor outcomes for households while boosting the bottom line of companies.
“Today in Australia, these weapons of influence have too often been used to nudge consumers towards products and services that are not fit for purpose or that prioritise commercial interests over consumer outcomes,” she said.
“Think advertising. Think marketing. Think sales tactics – face to face and now online with real-time nudges informed by smart algorithms.”
Ms Chester said company boards had lost touch with the customers they served, with too much focus on satisfaction ratings that could often be a poor or exploitable indicator of how a business was operating.
Boards had to become more attuned to the outcomes for customers and their capacity to understand just what was being offered by a firm.
“Closing the empathy gap first and foremost requires firms to appreciate the value of the consumer voice. And consumer voice, not meaning customer satisfaction with services,” she said. “But rather a real understanding of what outcomes matter to their consumers and are they being delivered.”
“ASIC has identified that closing the empathy gap also requires firms to understand the limits and vulnerabilities of their customers. And in doing so, not exploit innate constraints in human cognitive capacity and exploitable behavioural biases.”
Ms Chester said firms had used disclosure requirements to hide the true impact of a service or product on their customers who were facing an “unfair” burden of paperwork.
“The over-reliance on disclosure has inadvertently permitted and arguably enabled poor market conduct [like] business decisions that have led to poor consumer outcomes,” she said. “Disclosure has been expected to do too many things that it is not equipped to do. And there are limits to what it can do.”
There has been criticism within the financial services sector at the way ASIC has started to increase the public naming of businesses found to have poorly treated customers.
Ms Chester said business should expect more public transparency, arguing this enabled firms to get a better understanding of how they compared relative to their competitors.
“We’ll be naming more names. We’ll also continue to use mechanisms such as public hearings that critically lend transparency, accountability and legitimacy,” she said.
“We’ll continue to call out sludge and other weapons of mass influence where they harm consumers.”
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.