How can you evaluate the financial and strategic impact of fintech investments?

1 Financial impact

The financial impact of fintech investments can be measured by various indicators, such as return on investment (ROI), net present value (NPV), payback period, and breakeven point. These indicators can help banks assess the profitability, cash flow, and risk of fintech projects. However, they also have some limitations, such as ignoring non-financial factors, relying on assumptions, and being sensitive to changes in inputs. Therefore, banks should use a combination of indicators and perform sensitivity analysis to get a more accurate picture of the financial impact of fintech investments.

2 Strategic impact

The strategic impact of fintech investments can be evaluated by considering how they align with the bank's vision, mission, values, and goals. Fintech investments should support the bank's competitive advantage, differentiation, and growth strategy. They should also address the needs and expectations of the bank's stakeholders, such as customers, employees, regulators, and shareholders. To assess the strategic impact of fintech investments, banks can use tools such as SWOT analysis, balanced scorecard, and strategic alignment model. These tools can help banks identify the strengths, weaknesses, opportunities, and threats of fintech projects, as well as the key performance indicators and alignment factors.

3 Risk management

Risk management is an essential part of evaluating the financial and strategic impact of fintech investments. Fintech investments can expose banks to various types of risks, such as operational, technological, legal, reputational, and market risks. Banks need to identify, measure, monitor, and mitigate these risks using appropriate frameworks and techniques. For example, banks can use risk matrices, heat maps, scenario analysis, and stress testing to quantify and visualize the potential impact and likelihood of risks. Banks can also use risk appetite statements, policies, controls, and audits to define and implement the risk management strategy.

5 Change management

Change management is the process of managing the transition from the current state to the desired state of the bank after implementing the fintech investments. Change management can help banks overcome the resistance, uncertainty, and challenges that may arise from the fintech projects. Change management can also help banks achieve the intended benefits, outcomes, and value of the fintech investments. Banks can use change management models, such as Kotter's 8-step model, Lewin's 3-stage model, or ADKAR model, to guide the change management process. These models can help banks plan, execute, and sustain the change.