This study aimed to test, through empirical investigation, how the rapid advancement of digital transformation (DT) has impacted the price of financial services. To this end, we compiled a set of macro-level indicators on the aggregate outcomes of the financial services sector in Korea over the last three decades and conducted an analysis to gauge the effects of DT on the country using those indicators. Using the ARDL-ECM (autoregressive distributed lag error-correction model), we show that, over time, the unit cost of financial intermediation in Korea has tended to move in tandem with the growth in economic output, although the profit portion of the unit cost has not exhibited a long-term relationship with the GDP trend. The long-term effect of the DT trend is negative (i.e., cost-saving) for labor input, capital expenditure, and the total unit cost of financial intermediation, which are all shown to be statistically significant. Consequently, we conclude that DT contributed to enhancing consumer benefit, mainly by achieving the operational efficiency of labor and capital, from 1990 to 2019 in Korea. From a policy perspective, our finding implies that DT-driven innovation in the sector can benefit financial customers if excessive levels of profit are restrained through market competition.

This study aims to document the inter-linkages between two on-going global trends through an empirical investigation -(1) the rapid advancement of the ICT-driven innovations in delivering various types of financial service, and (2) the growing legal and regulatory efforts to protect consumers in the financial markets, after the recent financial crisis in particular. To that end, we compile a set of macro-level indicators on the aggregate outcomes of the financial service sector in Korea during the last three decades, and conduct a regression analysis to gauge the effects of the digital transformation (DT) in the country on those indicators. Using an ARDL-ECM as our empirical model, our results show that: Over time, the unit cost for financial intermediation in the country tends to move in tandem with the growth of economic output, although the profit portion of the cost did not exhibit a long-term relationship with the GDP trend; The long-term effect of the DT trend is negative (i.e., costsaving) for labor input and capital expenditure, which are shown to be statistically significant, and, as a consequence, its impact on the total intermediation cost is also positive and statistically significant. Based on the above outcomes, we elaborate their implications in designing a set of policy instruments to protect financial consumers, and also discuss the Vietnamese case as an illustration to extend this type of macro-level analysis for the purpose of coming up with a policy regime for financial consumers in an emerging-market context.