South Korea's Financial Watchdog Pushes Digital Transformation While Grappling With AI Investment Gaps
South Korea's Financial Supervisory Service (FSS) is urging financial firms to accelerate digital transformation and AI for Finance initiatives, but the regulator is also demanding stronger safeguards as the sector evolves.
The FSS highlighted that digital and AI-driven innovation can increase financial productivity and customer benefits. Yet the watchdog warned that financial firms must address emerging risks, including the growing digital divide and financial exclusion that could harm consumers.
Lee Jong-oh, FSS deputy governor for digital finance and IT, said financial firms should "check risk factors stemming from IT-related accidents in the digital environment" and take "proactive steps" during service development to protect customers.
Stricter Oversight of Digital Assets
South Korea has tightened oversight of the digital asset sector following exchange failures and alleged price manipulation. In February, the FSS announced increased supervision of digital currency trading, including scrutiny of whale trading and schemes that exploit exchanges.
In January, Google Play enforced stricter requirements for digital asset exchanges and wallet providers operating in South Korea, requiring proof of registration with the Financial Intelligence Unit. Platforms including Binance and OKX faced removal from the app store.
Manufacturing Sector Lags in AI Investment
Despite high awareness of digital transformation's importance, South Korean manufacturers are investing in AI at roughly half the global rate.
Rockwell Automation's 2026 State of Smart Manufacturing report surveyed 1,560 companies across 17 countries. While 95% of South Korean respondents said digital transformation is necessary for competitiveness, actual investment tells a different story.
Only 28% of South Korean manufacturers have invested in AI and machine learning, compared with a 50% global average. The share of operational budgets allocated to industrial technology investment in South Korea stands at 22.8%, below the global average of 27.6%.
Cost remains the primary barrier: 37% of South Korean respondents cited high adoption costs as their main obstacle. Uncertainty over return on investment accounted for 17%, while company policies and data security concerns each represented 13%.
Implementation Gap Widens
Globally, 34% of manufacturers are already using AI in operations, with expectations that more than half of all operations will receive AI support by 2030. In South Korea, only 27% of firms have implemented AI and machine learning despite identifying these technologies as critical for business performance.
On deployment scale, 43% of South Korean manufacturers use smart manufacturing technologies on a partial or large scale, compared with 59% of global manufacturers actively using them across operations.
Data and Security Challenges
Cybersecurity emerged as a significant hurdle. Over the past year, 41% of South Korean manufacturers reported at least one cyberattack, with IT systems and enterprise networks identified as most vulnerable at 39%, followed by employee awareness gaps at 36%.
Data utilization also lags. Only 34% of South Korean manufacturers effectively use manufacturing data, compared with 43% of global firms. This gap directly impacts the ability to train and deploy effective AI Data Analysis systems.
Lee Yong-ha, president of Rockwell Automation Korea, said the country needs to "accelerate investment in AI and smart manufacturing technologies to maintain global competitiveness," noting that operational budget allocation for technology remains below global standards.
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