Tension is rising across the financial sector over consumer protection. The Financial Supervisory Service has launched a "Consumer Risk Response Council" and is moving in earnest to a preventive supervision system. Banks, big tech companies and internet-only banks are facing regulatory pressure at the same time. As the watchdog makes clear it will proactively manage risk factors before incidents occur rather than focus on post-incident sanctions, the burden on the sector to respond is growing.

The financial sector said on March 25 that the FSS held a council meeting on March 20 and signalled a tougher sanctions policy focused on sectors where financial incidents are repeated. As IT-based service providers such as big tech firms and internet-only banks see recurring cases of system outages and weak internal controls, the watchdog made clear it will apply statutory sanctions without separate mitigation if similar incidents recur. If problems are judged to go beyond simple errors and reflect poor management, they could lead to monetary penalties, a stance seen as effectively applying a "zero-tolerance principle".

The scope of supervision also appears to be expanding from a focus on banks to the entire financial industry. The FSS has set IT system stability and internal control frameworks as key inspection targets. It plans intensive checks in areas with a high likelihood of incidents. This is seen as an intent to manage IT risk from an integrated perspective rather than by sector, viewing it as directly tied to trust in the overall financial system rather than an issue of individual companies.

Market conditions are also supporting the trend toward tighter supervision. As sales of equity-linked products through bank branches increase alongside recent inflows into the stock market, tough sanctions could follow if mis-selling occurs during performance-driven competition.

Financial companies are also strengthening related responses in line with the consumer protection push. KB Kookmin Bank, Shinhan Bank and Woori Bank set up consumer protection committees, a subcommittee under the board, at shareholder meetings this week. Hana Bank expanded and reorganised its existing consumer risk management committee to introduce a consumer protection committee. The steps also reflect consumer protection governance best practices presented by the FSS in the second half of last year.

The shift in the supervisory stance is also requiring structural changes in how the sector responds. Major financial firms are accelerating investment in IT infrastructure and overhauls of internal control systems. They are also focusing on building consumer-protection-centred operating frameworks by strengthening obligations to explain products and reorganising pre-emptive risk checks.

In particular, big tech companies and internet-only banks are clearly moving to re-examine overall operations, as IT stability is directly linked to trust given the platform-based nature of their services.

Internet-only lender Toss Bank is also strengthening its internal management system following a recent foreign exchange error. Toss Bank said, "We are continuously enhancing systems, processes and workforce operations overall, with IT stability, internal controls and consumer protection as the basic premise of service operations." It added, "We are strengthening capabilities for prevention, constant inspections and early responses to unusual signs to maintain a stable service operating system."

Kakao Pay is also strengthening its framework based on its Fraud Detection System. Its Financial Safety Center, which handles lost-item reports, mediation for mistaken transfers, impersonation reports and purchase dispute reports, operates 24 hours a day, 365 days a year. It also built a system within the app's integrated security solution to proactively detect various threats such as abnormal access, attempts to tamper with malicious apps, and phishing attacks, and to provide warning alerts to users. It is also strengthening responses to manage users' financial safety in advance through functions such as "Family Security Guard," "Fraud History Detector" and "Account Guard."

Naver Pay is also expanding inspections to strengthen internal controls and system stability. A Naver Pay official said, "We are comprehensively reviewing internal processes and strengthening verification procedures to prevent system errors from recurring." The official added, "We plan to continuously improve areas that need reinforcement."

Ultimately, the latest tightening of supervision is seen as a signal that goes beyond a simple expansion of regulation and calls for broader structural changes across the financial sector. Analysts say an environment is forming in which firms must move away from short-term performance-centred sales strategies and elevate consumer protection and risk management capabilities as core competitiveness.

Lee Chan-jin (이찬진), head of the FSS, on March 24 again stressed a preventive, consumer-protection-centred stance at a meeting with civic groups. Lee said, "Strengthening financial consumer protection is the top goal of supervisory work." He added, "We will strengthen the accountability of financial companies and do our utmost to ensure preventive financial consumer protection."

A financial industry official said, "The centre of gravity of supervision has shifted from post-incident responses to preventive blocking." The official added, "Enhancing IT stability and the level of internal controls and putting the emphasis on consumer protection is the financial sector's key task."