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.

Understanding fintech KPIs and metrics

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.

Why should you track fintech KPIs?

Tracking fintech KPIs is crucial for several reasons, each helping the company to operate more effectively and securely. Here are a few important reasons: 

• Performance measurement and management: With the help of KPIs, fintech companies can assess their overall performance across various aspects such as sales, customer support, and technical operations. Monitoring these indicators allows a company to recognize its strengths and pinpoint areas that require improvement.
  
  
• Understanding customer behavior: KPIs are critical to understanding how customers interact with fintech services and products. Companies can gain valuable insights into customer behaviors and trends by analyzing user activities, transaction frequencies, and preferences.
  
  
• Streamlining operations: For fintech companies, efficiency in operations is paramount. KPIs help these companies identify inefficiencies and bottlenecks in their processes. By continuously monitoring these indicators, companies can streamline their operations by eliminating unnecessary steps, automating routine tasks, and improving workflow.
  
  
• Attracting investment: Investors are keenly interested in companies that show clear evidence of growth, stability, and forward momentum, which are often demonstrated through solid KPIs. For fintech startups and growing companies, having robust and positive KPIs can attract investment by showcasing the company's potential for future success. 

• Risk management and compliance: KPIs related to compliance help fintech companies monitor their adherence to legal standards and regulatory requirements. Additionally, risk-related KPIs can identify potential threats to financial stability, data security, and operational integrity. 

Essential fintech KPIs to monitor 

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: 

• Customer acquisition cost (CAC)

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.

• Customer lifetime value (CLV)

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.

• Monthly active users (MAU) and daily active users (DAU)

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.

• Churn rate

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 value and volume

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.

• Net promoter score (NPS)

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.

• Gross payment volume (GPV)

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.

• Loan default rate

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%.

• Revenue growth rate

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%.

• Operational efficiency ratio

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%.

Best practices for fintech KPI monitoring and evaluation

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:

• Setting realistic and achievable KPI targets: Based on historical data and market conditions, it's crucial to set KPI targets that are both ambitious and attainable. These targets should challenge the team but remain feasible to avoid discouragement.
  
  For example, setting a realistic target for customer acquisition cost might involve analyzing past marketing efforts and adjusting for current strategies and market trends.

• Regular review and adjustment of KPIs: Fintech environments are dynamic, making it essential to regularly review KPIs to ensure they still align with the company’s strategic goals. This might mean adjusting targets quarterly or annually based on new data and changing market conditions. 

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.

• Employee engagement in metric achievement: Engaging employees in achieving and understanding KPIs can motivate them and improve performance. This can be done through training that explains how their actions impact KPIs and incorporating KPI-related goals into performance reviews. 

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.

How DataBrain helps you build a fintech dashboard to monitor key KPIs and metrics

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:

• Centralized data visualization: Consolidate data from various sources into a single, easy-to-use dashboard. This centralized approach allows you to view all your key financial metrics at a glance, facilitating quick assessments and decisions. 

• User engagement and behavior tracking: Track engagement and behavior metrics to understand how users interact with your services. This feature lets you see what’s working and what’s not in your user experience and adjust your strategies accordingly.

• Customizable metrics and reports: Tailor your dashboard to focus on the metrics that matter most to your business. With DataBrain, customize your reports and visualizations to meet your specific needs, ensuring that the insights you generate are relevant and useful.

• Scalability and integration: Designed with scalability in mind, DataBrain can seamlessly accommodate your growing data volumes and integrate with new systems you deploy, ensuring high performance and efficient handling of your fintech operations, no matter how much your business expands.
  

Ready to take control of your fintech metrics? Start with DataBrain today and transform the way you monitor and analyze your key performance indicators.