Why Data is Important for Fintech Companies

When you’re running a young company, every decision counts. And if you want to be the market leader, you need to consistently make the right decisions that serve your customer’s needs and strengthen your company’s market position.

More information means more intelligent decisions

Being a manager and a leader means taking responsibility for your employees and the company’s financial performance. This means that every decision you make is important, because each decision has an impact on your organization’s ability to meet its obligations.

However, not all decisions have to be difficult. With access to the right information, these decisions can be made faster and easier. And that’s why having a data strategy is necessary. Information is created by organizing and analyzing data, and information combined with industry-specific knowledge equals business intelligence. This is where the best decisions are made - decisions that build resilient companies and give you a competitive edge.

The more data you have about your company, the easier it becomes to make decisions. It helps you to better understand your target market, internal processes and to overcome the challenges you face. The right path becomes clearer as you gather and analyze the right information. And that makes the decision making process simpler.

Reduce the risk of poor investments

Fintechs are known to have high Customer Acquisition Costs (CAC), so it can be difficult to create a successful marketing campaign. Campaigns need a lot of upfront investment in the form of time and money. This is necessary to understand your customers, create new messaging and identify the right marketing channels. But how do we know that the marketing campaign is a success?

This is where having a data strategy can really save your skin. You need to know that your campaign is working, and you need the data to back it up.

Many companies find that one of the channels they use has a much lower conversion than the others, and it should be removed entirely. Or they discover that their messaging resonates far more with people aged 30-39 than those aged 20-29. Using and understanding this data makes your campaign far more effective, and allows you to optimize your budget. And it could stop an outright disaster before it’s too late.

Improve key areas of your business

Every business has challenges, and companies in the same industry often face the same challenges. Because there are so many options and switching costs are low, Fintech companies can find it difficult to retain the customers they’ve acquired and keep them invested in their products.

Let us assume you have 10,000 customers and your Annual Recurring Revenue (ARR) is $4,000,000 - that’s $400 in annual revenue per customer. We’ll also say the company’s churn is 25%. That means this company is going to lose 2,500 customers this year, coming to $1,000,000 in lost revenue. That’s a huge financial loss, and a risk to the company’s longevity.

This can also be seen as an opportunity. If the company can identify at-risk customers before they leave, they can implement a retention strategy. In this case, customer data can provide insight into how and when they use the product, and enable us to identify customers that are likely to leave. If we reduce churn by 30%, the project would directly increase revenue by $300,000 within 12 months. That would drastically improve the company’s financial position and reduce the associated risks.

Conclusion

It’s necessary for every company to make as many of the right decisions as possible, because the consequences can be severe if they don’t. A data strategy that is aligned to your business objectives can help you to reduce financial risks, create a competitive edge and help you make better decisions faster.