Discover crucial fintech KPIs and metrics to track in 2024. Optimize your strategy and performance with insightful data analysis, ensuring your fintech business stays competitive and agile in the evolving landscape
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Today, about 59% of financial service companies are tapping into big data analytics. They do this to better understand customer behavior, improve how they manage risks, and increase their operational efficiency.
For fintech companies, monitoring key performance indicators (KPIs) and other important metrics is crucial. These metrics guide fintech companies in fine-tuning their operations and improving customer services.
With a strong grasp of these indicators, fintech firms can enhance their performance and operations to increase revenue and profitability.
In this article, we will learn about important fintech KPIs and examine how they help companies make informed decisions. Let’s begin.
These are quantifiable measurements that financial technology companies use to assess performance, track growth, and optimize operations. They help companies gauge their success in various areas, such as customer satisfaction, financial efficiency, and operational effectiveness.
For instance, customer acquisition cost (CAC) is a metric that tells a company how much it costs to gain one new customer. It includes all the expenses involved in marketing and sales divided by the number of customers gained in that period.
By tracking CAC and other KPIs, companies can better understand their business dynamics, adjust strategies, and optimize their operations for better financial health.
Tracking fintech KPIs is crucial for several reasons, each helping the company to operate more effectively and securely. Here are a few important reasons:
KPIs provide actionable insights that help companies optimize operations and drive growth. Here are the key fintech performance indicators that are essential to measure the performance of fintech businesses:
This metric tells you how much the company spends on average to gain one new customer. It includes all marketing and sales spending over a specific period. Lower CAC indicates more cost-effective customer acquisition strategies.
How to calculate: CAC = Total Costs Spent on Acquiring Customers/Number of Customers Acquired
Example: If a fintech spends $5,000 on marketing in one month and gains 250 new customers, the CAC would be $5,000/250 = $20 per customer.
This measures the total revenue expected from a typical customer for their relationship with the company. A higher CLV than CAC suggests a healthy return on investment, indicating that the customers generate more revenue than it costs to acquire them.
How to calculate: CLV = Average Revenue Per User (ARPU) × Customer Lifespan
Example: If the average customer spends $30 per month and stays with the company for an average of 3 years (36 months), then CLV = $30 × 36 = $1,080.
These fintech metrics count the unique users interacting with the service at least once within a month or a day, respectively. They can help companies identify trends, peak usage times, and the effectiveness of engagement strategies.
How to calculate: Typically counted, not calculated.
Example: If 1,000 users log in daily, and 5,000 in a month, the DAU is 1,000 and MAU is 5,000.
This fintech performance indicator shows the percentage of customers who have stopped using the company's services over a specific period. A lower churn rate means better customer retention.
How to calculate: Churn Rate = (Number of Customers at Start of Period - Number of Customers at End of Period)/Number of Customers at Start of Period
Example: If you start the quarter with 200 customers and end with 180, the churn rate is (200 - 180)/200 = 10%.
Transaction volume counts the number of transactions processed, whereas transaction value sums up the total value of these transactions during a given period. They are key indicators of the platform's activity and financial health.
Example: If 10,000 transactions worth $500,000 are processed in a month, the volume is 10,000, and the value is $500,000.
Customers are surveyed on how likely they are to recommend the company to others on a scale from 0 to 10. Responses of 9 or 10 are considered promoters and 0 to 6 are detractors.
How to calculate = % of Promoters - % of Detractors
Example: If 70% of surveyed customers are promoters and 10% are detractors, then NPS = 70% - 10% = 60.
This is the sum of all transaction amounts the platform processes over a certain period. It serves as an indicator of the scale of financial activity handled by the platform and reflects both its growth and its market influence.
How to calculate: GPV = Total Value of Transactions Processed
Example: If $1 million worth of transactions were processed in January, then the GPV for January is $1 million.
This indicates the percentage of loans where the borrowers have failed to meet the legal obligations of the loan agreement. A higher default rate indicates greater financial risk and potential losses, signaling the need for tighter credit policies or improved risk management strategies.
How to calculate: Loan Default Rate = (Number of Defaulted Loans/Total Number of Loans) × 100
Example: If out of 1,000 loans, 50 have defaulted, the loan default rate is (50/1000) × 100 = 5%.
This percentage shows how much a company's revenue has increased (or decreased) compared to a previous period. A positive growth rate suggests an improvement in sales and potentially successful business strategies, while a negative growth rate might signal challenges or declining market interest.
How to calculate: Revenue Growth Rate = [(Current Period Revenue - Previous Period Revenue)/Previous Period Revenue] × 100
Example: If revenue was $100,000 last quarter and $110,000 this quarter, the growth rate is [(110,000 - 100,000)/100,000] × 100 = 10%.
This metric assesses how effectively a company is utilizing its resources to generate revenue. A lower ratio indicates the company can produce more revenue per dollar of expense. Conversely, a higher ratio suggests that the company is potentially spending too much in relation to the revenue it generates.
How to calculate: Operational Efficiency Ratio = Operating Expenses/Revenue
Example: If operating expenses are $50,000 and revenue is $200,000, the efficiency ratio is $50,000/$200,000 = 0.25 or 25%.
Effective monitoring and evaluation of fintech metrics are crucial for any financial technology firm aiming to track its performance and guide its strategic decisions. These practices help companies stay competitive and responsive in a rapidly evolving industry.
Here are some fundamental best practices:
For instance, if a fintech firm launches a new product, it may need to modify its revenue growth rate expectations and monitor different metrics relevant to the new offering.
For example, if monthly active users is a key metric, employees in product development and customer service should understand how their work influences user engagement and retention.
DataBrain offers powerful tools to create a fintech dashboard that effectively monitors key KPIs and metrics, enhancing your financial insights and decision-making capabilities. Here's how DataBrain can help:
Ready to take control of your fintech metrics? Start with DataBrain today and transform the way you monitor and analyze your key performance indicators.