Pawnshop Transformation Efforts in the Era of Financial Services Disruption

As one of the oldest businesses in Indonesia, pawn services have helped the economy of the lower middle class to get loans quickly without relying on high-interest loans.

However, in recent years, the role of financial industry players in Indonesia has begun to shift by the presence of fintech. Not only banking, fintech also disrupts the pawn business because access to loans can now be obtained easily and quickly.

This situation encourages Pegadaian to start initiating digital use in increasing its role in the digital financial ecosystem. Moreover, Pegadaian is a company top of mind in the pawning sector which controls 90 percent of the share with more than 4.000 total outlets in Indonesia.

Pawnshop business transformation

Pegadaian's initiation began with efforts to digitize its services through the Pegadaian Digital Service (PDS) platform in April 2018. At that time, Pegadaian did not have digital roadmap and a special division tasked with executing the company's innovation development.

In its journey, Pegadaian then determined to establish the Company's Long Term Plan (RJPP) for the period 2019-2023 as the foundation of transformation that focused on four things, including (1) business model, (2) operations, (3) marketing channel, and (4) market segments.

In short, this state-owned company wants to transform its position in the market, no longer as a pawnshop, but also a company that offers other financial services. It is evident from the expansion of Pegadaian services to gold.

From an operational perspective, Pegadaian utilizes digital technology to analyze the profile of potential customers. Not only that, the company is also transforming channel selling to digital and playing to a wider market segment, namely the upper middle segment.

To carry out the plan, Pegadaian formed a Transformation Office (TO) division in 2019. VP Digital Business Development & Partnership of Pegadaian Herdi Sularko said that TO has three roles, namely exploring new business models, updating business processes, and updating work culture in the scope of work. organization to be more agile in developing products/services.

“That digital evolved and we have to start practicing [adapting] because every day there is something new. Problem In corporations, communication is only between departments or divisions. Hence, we must nimble and agile. Our focus is not on being a startup, but on forming a culture of 'our work and others can do it' align'," said Herdi as quoted from Corporate Digital Transformation Report 2020.

Digital product development

As mentioned earlier, Pegadaian seeks to reach a wider market. This strategy was then answered by developing a Pegadaian Digital Service (PDS) which offers a number of services, such as Online Pawning and Buying and Selling Gold.

Currently, Pegadaian has three main businesses, namely pawning, financing, and gold investment. As much as 90 percent of Pegadaian's revenue is contributed by pawn services. Based on company data, as many as 2 million customers out of a total of 13,86 million customers in 2019 have now made digital transactions through PDS.

To boost the number of customers, Pegadaian has just commercialized the Pickup & Delivery Service feature for Pawn Online services in the Jakarta area. The pawn shop cooperates Gojek as a logistics partner for Pawn Online through the GoSend service.

Previously, Pegadaian had introduced this service—originally named Pawn on Demand—in April last year. At that time, Pawn on Demand was only a trial run at several points in Jakarta.

Contacted DailySocial Recently, Herdi revealed that the availability of shuttle services for Gadai Online will follow the readiness of Pegadaian outlets and the scope of logistics partner services in other regions in Indonesia. "This collaboration is for last mile logistics. So, we pick up the ball by holding hands Gojek through the GoSend service," he said.

The Online Pawn Service in the PDS application allows customers to send pawned goods with GoSend. Customers can pawn goods without having to come to the outlet and send them to the nearest Pegadaian outlet (7km radius) from their location.

Just like the GoSend order process in general, the courier will pick up the collateral to the consumer's location. They can also monitor (tracking) courier travel to the destination. In addition, customers can still communicate with couriers and PDS staff via chat.

Furthermore, his party also plans to present GoPay services as a payment option for Pickup & Delivery Service services. In addition, Pegadaian also plans to test the use of the Dropbox platform to estimate the price of collateral based on photos sent by customers.

"Currently it is not possible to go to GoPay, but this has been included in our development roadmap going forward. GoPay is needed for payments trip to outlets. In the future, we want to centralize digital products in the PDS application," he explained.

Collaboration and outlet transformation

In addition to digitizing services, Pegadaian has also made a breakthrough by building Open API infrastructure to enter the financial ecosystem in Indonesia. According to Herdi, collaboration with many partners has the opportunity to creating new ecosystems and income lines.

"There has been a disruption out there. All banks start towards open banking platform. The problem is, the pawnshop industry doesn't have benchmarking because our position is between banking and other financial industries. Indeed, this business is not affected but we can see a business model that can be implemented.scale up, "He explained.

One of Pegadaian's major collaborations is to engage Tokopedia in providing Online Gold Buying and Selling services which launched in January 2019. This collaboration is claimed to be a success by the company considering that the integration process only took two months and pocketed money. traction positive from Tokopedia users. 

Not only that, Pegadaian has also started modifying a number of items oto be relevant to today's market needs. Pawnshop has transformed 31 oit became The Gade Coffee & Gold against over 4.000 o in Indonesia.

According to Herdi, since the beginning the company applied the concept of agile organizations and CI/CD framework (Continuous Integration/Continuous Development), each product will continue to be developed with user experience as top priority. "We want to give customer experience the same as in offline. Present anywhere with easy and agile services for all people," he explained.

Meanwhile from the side Back-end and ground operations level, Pegadaian also implements technology solutions, such as IoT-based RFID network and Robotic Process Automation (RPA) to improve collateral security and operational efficiency.