Civilizing digital finance: How hybrid governance transforms gold-based services into an ethical safety valve for the poor

Abstract

Background: Digitalization is widely promoted as a solution for financial inclusion. However, in emerging economies such as Indonesia, the expansion of digital financial services has also contributed to problems of predatory lending and data insecurity. This study challenges the techno-centric assumption that a “digital-first” approach is inherently superior by examining how traditional gold-based financial services can be transformed into a more inclusive and protective digital ecosystem. Methods: Using the Digital Era Governance (DEG) framework, this study employs a qualitative single-case design to analyze the institutional transformation of PT Pegadaian (Persero). The analysis focuses on how traditional gold savings and pawn services are reconfigured into a hybrid “phygital” (physical plus digital) service model. Findings: The findings reveal that the success of digital transformation is not achieved by eliminating physical services but by integrating them with digital technologies. Unlike fintech platforms that rely primarily on algorithmic scoring, Pegadaian functions as an ethical safety valve by re-embedding human verification within digitally enabled processes. Physical branches continue to serve as anchors of trust, helping protect low-income users from the risks associated with predatory online lending while improving access to formal financial services. Conclusion: Sustainable financial inclusion in the Global South requires a human-in-the-loop governance model that balances digital efficiency with institutional trust and social protection. State-backed gold savings and pawn mechanisms can strengthen the protective function of financial institutions rather than diminish it in the process of digitalization. Novelty/Originality of this article: This study extends the Digital Era Governance perspective by demonstrating that hybrid governance, combining physical and digital service infrastructures, can serve as an ethical model of digital financial inclusion. It highlights the importance of human verification and trust-based service delivery in protecting vulnerable communities within an increasingly digital financial environment.