Enhancing pawnshop service innovation in the digital era: A qualitative study on customer experience and operational transformation at Pegadaian Wonosari

Abstract

Background: The digital era compels traditional financial institutions, including pawnshops to innovate. However, studies on pawnshop digital transformation balancing operational efficiency with trust-based, relational services remain limited. This study explores the dual impact of digital service innovation on customer experience and operational transformation in a pawnshop context. Method: This qualitative, interview-based case study was conducted at a public pawnshop in Indonesia (Pegadaian), which also funded the research; this dual role is disclosed for transparency. Data were collected through semi-structured interviews (n = 4), non-participant observation, and document analysis, and were thematically analyzed using an interactive model of data condensation, display, and conclusion drawing. Findings: Results reveal a duality, digital tools enhance transactional convenience and back-office efficiency but create a relational gap in customer trust for complex transactions and introduce workforce adaptation challenges. Customers abandoned digital channels for high-value or repeat pawn transactions, citing the absence of face-to-face reassurance. Frontline staff reported added reconciliation duties and role ambiguity, relying on informal peer learning rather than formal retraining. Branch managers observed routine transactions shifting to digital channels, while trust-intensive services remained counter-bound. Interpreted through Service-Dominant Logic and digital transformation theory, technology acts as an operant resource that must augment, not replace, human-centric value co-creation. Conclusion: Successful innovation requires a digitally-augmented service model that aligns internal process optimization with preserving trust-based customer relationships. By sustaining trust-based access to microfinance amid digital disruption, this model strengthens the economic resilience of low- and middle-income households and supports sustainable, inclusive financial development. Novelty/originality of this article: This article contributes a novel, integrated framework for digital transformation in trust-intensive microfinance, uniquely identifying the persistent relational gap and workforce adaptation dissonance as critical, underexplored factors in the pawnshop sector's evolution.