Before getting into activation metric and why it matters to fintechs, it’s essential to understand the nuanced difference between adoption and activation and their impact on fintech growth. Though related, these two metrics measure distinct phases in the user journey and affect how companies prioritise product strategy and user engagement efforts.
- Adoption Rate: Tracking Feature Usage
The adoption rate measures how many users have started using a new feature or product. Consider it the first step. This is the stage where users discover, enable, or try out a feature within a fintech app.
For example, if 1,000 people download a banking app and 250 enable the cashback feature, the adoption rate for that feature is 25%. This tells the fintech company that the feature has caught the attention of those 250 users.
In short, adoption focuses on whether users notice and activate a feature, but it doesn’t measure if they keep using it.
- Activation Rate: Realizing Value Through Deeper Engagement
The activation rate unlike adoption metrics, reflects how many users engage deeply enough with a product to realize its value. It tracks whether users move beyond mere discovery to meaningful use—getting hooked on the product and becoming habitual users.
How does this have Effect on Fintechs ?
Activation metrics are directly linked to retention and customer lifetime value (CLV). An activated user is someone who installed the app or enabled a feature and regularly engages with it, such as consistently funding savings goals or using cashback benefits.
Example: Out of the 250 users who enabled cashback, if only 50 used it for three or more transactions, the activation rate would be 20%. This group represents users who see tangible value from the feature, making them more likely to stay engaged and loyal.
The Consequences of Confusing Adoption with Activation in Fintech
- Overestimating Success: High adoption rates may create a false sense of achievement. Fintech companies may assume features are succeeding, only to see drop-offs when users fail to extract ongoing value.
- Misalignment of Goals: Retention efforts will falter if Fintech focuses on adoption over-activation. Products that users don’t engage with regularly risk abandonment, increasing churn rates.
- Impact on Product Development: Understanding activation ensures product teams refine features based on actual engagement data, not just initial uptake. It guides efforts toward enhancing the user experience to encourage long-term use.
Why Both Metrics Matter for Fintechs
Both adoption and activation are critical, but they serve different purposes at distinct points in the user journey:
- Adoption shows whether the product or feature is visible and appealing.
- Activation ensures users see lasting value, fostering loyalty and retention.
Focusing solely on adoption can inflate success metrics, while activation indicates user engagement and future growth potential. A well-rounded fintech strategy tracks both metrics, ensuring products attract users initially and retain them through ongoing engagement.
Key Activation Metrics and How to Track Them
- Time-to-First-Transaction
Here is where things get a little more data interesting. Tracks how quickly a new user completes their first critical action (e.g., account funding or first transfer), and why does it matter ? A fast first transaction confirms that the product delivers immediate value, builds trust and has the tendency to encourages repeat use.
- Tracking Method: Use tools like Amplitude or Google Analytics to monitor when users hit this milestone and compare the timing between other varieties of datapoints.
This insights allows marketing leaders create optimizing processes to improve feature usage.
Example: A digital wallet app reduced its time-to-first-transaction by 15% by sending automated reminders to users who signed up but hadn’t completed funding within 48 hours . WebEngage
2. Customer Effort Score (CES)
Customer Effort Score (CES) is a simple metric that measures how easy it is for customers to complete a specific task, like signing up, activating a feature, or resolving an issue. In fintech, a low CES means customers find your platform easy to use, which boosts engagement and reduces churn.
Strategies for Improving Activation Rates
- Personalizing the Onboarding Journey
Different users require different onboarding paths. Fintechs can segment users based on behaviour and tailor experiences to their needs.
- Example: A first-time investor might receive a guided tutorial on setting up portfolios, while an experienced user can skip to advanced investment tools.
2. Optimizing UX to Reduce Friction
To reduce cognitive load, break onboarding into micro-conversions (e.g., adding a payment method, setting up notifications).
- Example: A savings app improved account funding rates by 20% by using progress bars to show how close users were to unlocking their first reward.
3. Using Behavioral Analytics for Real-Time Adjustments
Behavioral analytics tools enable fintechs to monitor user activity in real-time, identifying drop-off points and sending timely nudges.
- Example: When users abandon the app during KYC, they receive a notification: “Almost there! Complete your KYC to unlock your savings rewards.”
Measuring Success and Continuous Improvement
To ensure success, start by setting clear benchmarks for activation metrics that align with your business goals. For example:
- Aim to reduce the time-to-first-transaction to under 48 hours.
- Target 20% feature adoption within the first month.
Next, build feedback loops to continuously refine your strategies. Use tools like CES surveys, A/B testing, and behavioral analytics to identify areas for improvement.
Actionable Next Steps for CMOs
- Set activation benchmarks and track metrics like feature adoption and CES.
- Use behavioural analytics to identify drop-off points and deploy real-time interventions.
- Partner with experts to design personalized onboarding funnels that maximize conversion and engagement.
Conclusion
Activation is not just about acquiring users—it’s about ensuring they see and get value early on. Hire us to begin your activation processes.
