Using the viral coefficient as a performance indicator for fintechs

In today’s highly interconnected world, six degrees of separation look more achievable than ever. Due to the prevalence of social media, word about exceptional products has many opportunities to spread rapidly. With algorithms promoting content of this nature, certain products can quickly go viral, as seen with cryptocurrencies.

On paper, virality is a good measure of your product’s reach. But is it a reliable Key Performance Indicator (KPI)? We look at the pros and cons of using the viral coefficient as a performance indicator for your fintech.

What is a viral coefficient?

In simple terms, a viral coefficient refers to the number of new users your average existing customer generates. In other words, it is the number of referrals that turn into customers.

The viral coefficient measures your exponential referral cycle (also known as virality). It’s based on the idea that satisfied customers are always incentivized to refer their family, friends, and colleagues to your products.

How do you find the viral coefficient?

To calculate your viral coefficient, use the following formula:

Viral coefficient = (C x R x CR / 100) / C
Where: C is the number of your existing customers
R is the average number of referrals made by each customer
CR is the average conversion rate for the referrals made

Say, for example, that your fintech has 1,000 customers, each of which makes an average of 6 referrals. Out of the 6, 2 typically turn into new customers. This means your conversion rate is 33.3% (i.e., 2 / 6 x 100%).
Now, to put it all together in the formula, your viral coefficient would be:
(1,000 x 6 x 33.3 / 100) / 1,000 = 2
That means every one of your customers brings in an average of two more customers. That’s great, not just for a fintech but for any business.

What is a good viral coefficient?

The higher the viral coefficient, the better. Generally, a viral coefficient of 1 or above is good because it means you gain one more for every customer you acquire. This brings down your customer acquisition cost (CAC).

Pros of using the viral coefficient as a performance indicator for your fintech

The viral coefficient can be a good measure of how a fintech company is performing. This is particularly true if you combine it with other KPI’s. Here are some pros of using it as a performance index:

Shows growth and trajectory

More than anything, your viral coefficient indicates the rate at which your company gains new customers from referrals. It goes without saying that an exponential increase in your customer base points to the company’s growth. That is why a positive viral coefficient indicates a positive trajectory. Furthermore, it shows that the company uses a cost-effective approach to attract new customers.

Helps with quality controls

A positive viral coefficient is a direct result of a good product. If people recommend your fintech service – whether by word of mouth or on social media platforms – it means that you have a product that solves a pain point.

A high viral coefficient indicates that the product effectively meets consumer needs. On the other hand, if your viral coefficient is less than 1, you may need to know why your current users are not recommending your fintech services to others. Running a quality check would be a good place to start. Make sure to improve on any quality deficiencies.

May predict the effectiveness of other marketing efforts

Viral products often take the internet by storm. They typically attract great user reviews on various online platforms. This is what ultimately creates a positive viral coefficient. Marketers can use this coefficient to predict (and measure) whether or not other advertising efforts (like word of mouth) can create a similar buzz around the same product.

Indicates target audience and reveals additional data

Valuable information about the product can be revealed using its viral coefficient performance in different areas, age groups, and platforms. Social media data can give companies a good idea of who the product is servicing most efficiently and what improvements are needed the most. A strong viral coefficient can be a gateway to more data and supplemental KPI’s to help guide the company’s actions moving forward.

Compatibility with modern culture

With business continuing to shift more online, social media has become more impactful than ever. Using the viral coefficient as a KPI in such a chaotic environment can help quantify a product’s online influence. A strong viral coefficient can be an indicator of pop culture influence. A significant social media presence can signal a product reaching modern culture effectively, which is priceless in today’s business world.


While the viral coefficient can be a good performance indicator, it does have a few drawbacks. The main disadvantages include the following:

Dependence on external factors

Virality is, by and large, embedded in a product’s quality more than marketing efforts. While a company’s advertising executives can try to make something go viral, the possibility of it going viral depends on how others react. This makes it a volatile and largely unreliable measure of performance.

Not dependable on its own

Virality is a good indicator that your product or service is acceptable to the target audience. However, it can’t independently indicate company growth, especially since it is primarily short-term and dependent on consumer impulses. Therefore, to get a more accurate measure of your fintech’s performance, you may need to combine your viral coefficient with other KPI’s.

Final thoughts

All in all, a positive viral coefficient is a good thing. It shows that the company sells products that create a good buzz. And while it may not be the most reliable standalone growth indicator, you can use it to determine how fast your customer base is growing.