Korean banking watchdog the Financial Supervisory Service (FSS) is to help 650,000 small retailers replace their magnetic strip card readers with more secure "integrated-circuit" readers.
The upgrade, which will be partially paid for by South Korean credit card companies, is intended to prevent a repeat of recent hacking incidents.
A spokesman for the FSS said: "The FSS will have credit card companies give financial support worth KRW100bn ($96m) to help complete the replacements next year,"
"If a customer pays his or her purchase with a credit card at a supermarket which uses the point-of-sale terminal for settlement via a strip reader, it is very vulnerable to hackers."
The upgrade will cost around KRW300bn in total and larger retailers will also be asked to use only integrated circuit readers from Q4 2014.
During January, the FSS announced that the information of 20m credit card users had been stolen by a temporary employee of personal credit ratings firm the Korea Credit Bureau.
The three card companies who were involved, KB Kookmin Card, Lotte Card and NH Nonghyup Card, were banned from issuing cards for three months.
In a separate incident, on 11 April the FSS said hackers had stolen the personal information of about 200,000 South Korean credit card users, using some to make fake cards and rack up fraudulent charges of about KRW120m.
The regulator has ordered all credit card companies in the country to upgrade their fraud detection to ensure similar data thefts do not happen again.
Credit card companies are also preparing to issue integrated circuit cards to all their customers, according to the Credit Finance Association of Korea.