From regulation to trust: Governance pathways in digital pawnshop transformation

Abstract

Background: Pawnshop institutions operate within regulated non-bank financial systems and play an important role in providing financial access for economically vulnerable communities. In the digital finance era, regulatory compliance alone has proven insufficient to sustain institutional legitimacy, as public trust increasingly depends on how governance principles are implemented and perceived in practice. Existing studies on pawnshop businesses predominantly emphasize regulatory structures or operational efficiency, while offering limited conceptual integration between regulation, governance, and institutional trust. Methods: This study employs a qualitative conceptual and policy-oriented literature review based exclusively on secondary sources, including academic journal articles, books, international organization reports, and national regulations. Governance theory, regulatory governance, and institutional trust serve as the primary theoretical foundations, which are analyzed through systematic document review, thematic synthesis, and conceptual mapping. Findings: The analysis demonstrates that regulatory frameworks provide a necessary legal foundation but do not automatically generate public trust. Trust formation is primarily shaped by governance practices related to transparency, accountability, ethical conduct, fairness, and clarity of communication, particularly under digital service delivery conditions that intensify information asymmetry. Governance practices function as mediating mechanisms that translate regulatory intent into institutional behavior perceived by the public. Conclusion: Transforming pawnshop institutions in the digital finance era requires a strategic shift from compliance-centered regulation toward governance arrangements explicitly designed to cultivate and sustain public trust. Novelty/Originality of this article: This article offers an integrative conceptual framework that positions governance practices as the central mediating link between regulation and public trust, providing policy-relevant insights for strengthening legitimacy and trust in digitally transforming pawnshop institutions.