Searching for the actual problem is much more important than the invention of ideas. Many startups do not know how to conduct a problem interview and try to solve imaginary, not real problems. Corporations do not conduct market research with lean-methodology and then are surprised that their new service is not required on the market. Incubators, accelerators and investment funds receive a lot of unmotivated presentations where founders can not articulate what problem they try to solve and often proceed to spend investments for advertising.

See below the list of problems, trends, and growth points on the Fintech market. The data were obtained through interviews with experts, investment analytics and investigation of the relevant companies. I hope this research will help everyone to do their job a little more productively.

Grouping the issues/items was a problem during the writing of this article. I was going to sort out the problems based on the market size. There is also the option to divide problems based on region or by B2B / B2C model. Konstantin Stiskin from FinSight Ventures proposed to divide items into 3 groups - lending, payments and asset management. From my point of view it is the most suitable classification. Konstantin also pointed out that there are other FinTech verticals: mortgages, mobile wallets and banks, security, electronic money and others. I leave the decision which classification is the best to the readers.

I Lending

1. Rising regulation level to the banks

As far as requirements level are increased banks lend less money. Solution: Lending Club - carries risks from its balance to the balance of institutional investors. Avant - leaves the risks on their balance but does not take deposits and less regulated.

2. Low yields on existing financial instruments

Institutional investors can not reach out directly to consumer loans. Solution: Lending Club, OnDeck. Interest rates in Europe and USA are at historically low levels for several years so investors are looking for instruments with higher returns.

3. Financial illiteracy

Loan payments and interest rates structure are too hard for understanding. The new generation of millennials is more than 25% of the population in the USA. They demand transparency of financial products such as credit cards as well as on student and conventional loans. Solution: Earnest, Float Credit, LendUp.

4. The difficulty of estimating the financial condition of the borrower

Traditional financial scoring like FICO works too bad. On emerging markets there are no financial data on people. Banks overestimate the risks of lending to young but creditworthy millennials. This increases the cost of loans and millennials distrust traditional banks. Solution: alternative sources of information - Facebook, LinkedIn. They allow to more accurately assess the risks. On emerging markets the scoring uses information about mobile balance (FirstAccess). Prosper - P2P loan marketplace.

5. New business models are created

New technologies create new models of interaction. These models did not exist earlier because it's economics doesn't fit or there are no technological possibilities. Solution: Sequent - allows to issue credit cards connected to you mobile phone. Yodlee - aggregates bank accounts.

6. High lending rates

Rates for small business - 20-50%. For individual - from 14% to 1000% (in Russia). Solution: Bond Street, Finexkap, Pave, Lendio - loans for small business.

7. Too hard and long to get a loan

Typical duration of loan consideration - 3-14 days. For the Russian Federation there is an additional barrier - a requirement of person's address in the bank's region and verified income. Solution: microfinance companies (loans for 5 minutes), AssetAvenue, OnDeck.

8. Too hard to get a loan with bad or absent credit history

In such cases get a loan is impossible or too expensive. Solution: microfinance, Upstart, LendUp.

9. Too long to submit loan applications to many banks

It takes too much time to prepare documents for each bank. Solution: Site aggregators where person can submit one applications for many banks simultaneously in one click.

10. Too hard to take credit not in bank

We need new tools for lending outside the traditional financial institutions. Solution: peer-to-peer (P2P) lending - LendingClub, SoFi, CommonBond, RateSetter, Zopa, LendingRobot, SinoLending, FinanceIT.

11. Too long and expensive to get a credit line for the company

Companies especially in trade area need to get quick loans taking into account the specifics of their work. Solution: express analytics on the company for quick issuance of a credit line - Kabbage, Can Capital.

12. It is necessary to get instant credit at purchase

Consumer should have a possibility to get express credit. Solution: a widget for online store to get instant credit on goods page - Affirm. In large electronics stores almost any product can be sold via credit.

13. Not enough flow of high-quality loan takers

Banks and microfinance companies spend a lot of time and money for processing loan applications. Solution: Sites which generate leads for microfinance institutions and banks.

II Payments

1. International money transfers too expensive and inconvenient for immigrants

International payments vary from country to country. Cross-border payments are growing dramatically (Remittance). Solution: Many companies are trying to make these payments cheaper and more convenient for migrants - Xoom (bought by PayPal), Revolut, Moni, P2P Cash. Money transfer via Facebook Messenger, SnapChat, PayPal, Apple Pay, Google Wallet, AliPay. Money transfers via banks, express money transfer systems Western Union.

2. Increasing regulation level for banks in payments

Most international payments are processed through US banks. Regulation acts are created: KYC, AML, OFAC. All money senders and payments are under the supervision of the relevant authorities. Following the KYC and AML rules is too hard and expensive which heavily affects the economy of remittances. Solution: Trulioo - a single point of customers and payments verification.

3. Slow payments speed

In many countries there are many outdated financial systems ([legacy systems[(https://en.wikipedia.org/wiki/Legacy_system)). In the USA, for example, payments are processed very slowly through the ACH. As a result Federal Reserve created a commission for increasing speed on payments. Solution: Dwolla - processing payments in real time.

4. Too hard to integrate standard services

There are many services which have to be customized and integrated. Solution: simplification of processing online through the API. Stripe, Credorax (payments), Shippo (shipping).

5. Mobile and P2P payments

Increasing speed, safety and simplification of the transaction. Solution: Square Cash, Snapchat Money, Venmo.

6. Innovations in POS-terminals

There are many standard solutions that are too expensive and difficult to customize. POS-terminals are expensive and rarely updated but they must be compatible with the new payments methods. Solution: Poynt, Square, iBeacon technology.

7. Consumer can not pay by credit card without the Internet or ATM

In many cases (taxi, cafe, hotel) should be cheap and mobile way of payment. Solution: Square (mobile acquiring).

8. Low privacy in payments

For various operations (even not illegal) there is a need of cryptocurrency which provides: privacy, deflation, instant money transfer regardless of frontiers, legislation and regulation of the financial authorities. Solution: Bitcoin, Bit Energy Equivalent (BEE).

9. Not enough payment methods on websites

We need tools for easy integration of various payment options. Solution: Braintree, Paymantix, Expay - all payment methods in one widget.

10. It is impossible to pay for the purchase with money on the balance of the mobile

With a lack of cash or money on a credit card we need a way to pay via mobile phone account. Solution: payment through the phone - Mozido.

11. There is commission for bank-acquire during payment

Upon receipt of payment from the client the company pays to the bank a commission for money processing. Solution: There are approaches where commission pays buyer and then he/she returns the money as tax benefits (expenses for education, medical services).

12. Banks can not work legally with the Blockchain technology

Financial institutions can not get an advantage of Blockchain - fast transactions, flexibility, reliability and low operating costs. This is due to the risk of falling under the special supervision of regulatory authorities because of the possibility of participation in money laundering, work with countries or persons of under sanctions or other prohibited activities. Solution: Polycoin - processing platform of Bitcoin-payments allowing regulated financial services (Forex, banks) process transactions with virtual currencies.

III Asset management

1. The high cost of the asset management

Traditional money managers are too expensive in relation to the assets of the new generation of millennials. Solution: Wealthfront, Betterment - online services for asset management with minimum human involvement (robo-advisors).

2. Financial instruments are too complex

There is a trend for consumption of simple and transparent financial products with clear tariffs. Solution: Robinhood - simplification of trading. Tools where client chooses a strategy and invests in 1-click - Acorns, SigFig, Future Advisor, BlackRock.

3. It is difficult to invest in a certain trend

Analysis of the companies in a specific niche requires skills and takes time. Solution: MotifInvesting - investing in the specific trends (alternative energy, biotech, organic food) but not in highly profitable companies.

4. It is difficult to make large investments in real estate

For expensive houses need tools to invest small amounts of money of depositors. Solution: Timeshare, Real Crowd.

5. Financial losses on money exchange

It should be ways to avoid this. Solution: Exchange rates aggregators.

6. It is difficult to choose the best bank for deposit

We need a tool to search for a reliable and profitable bank. Solution: Sites-aggregators of best bank deposits.

7. Difficult to get a feedback from banks

When working with the banks need a way to solve the problems. Solution: Sites-aggregators with bank reviews.

8. Deposit should be protected from bankruptcy of the bank

The investor must be protected from bankruptcy or revocation of the license of the bank. Solution: Deposits are insured by government.

9. Control personal spending

People need services to control incomes and expenses. Solution: Mint, Expense Manager, Spending Tracker.

10. It is difficult for immigrants and expats to open a bank account

Many banks have limited opportunities to use the banking system to non-residents. Opening an account can last for a long time. There are higher tax rates from deposits of non-residents. Solution: Monese - without offices, mobile first bank for the UK / EU.

11. Inconvenient to use credit cards

It is necessary to follow the overdraft, the period of repayment and to pay for service. Solution: Pockit - prepaid MasterCard.

12. It is difficult to invest in crowdfunding projects

There are many crowdfunding platforms (only in UK 100+ sites). Investors need a simple and fast way to enter into this market. Solution: investUP - crowdfunding supermarket. 25+ platforms in one place for investors.

13. Investors are not happy with speed and quality of data from news agencies

Platforms like Bloomberg and Reuters inform good for stable markets. For high-risk emerging markets the process of obtaining adequate information is too complex and expensive. As a result investors do not see the whole picture of the market underestimated the liquidity and overestimate risk and miss good opportunities for investment. Solution: TRDATA - a platform for monitoring markets in real time. Nordigen.

14. It is difficult to process information about bond market

The data on bonds are often incomplete and inaccurate and all the conditions are written in 100+ pages prospectuses for bonds. This complicates the analysis of information and leads to errors in investing. Solution: SGDA - decision-making system for information processing on bonds

15. Inconvenient services to work with bitcoins

People are looking for comfortable platform to buy sell and transfer bitcoins. Solution: GateCoin, Sun & Son, E-coin.

16. Inconvenient services for currency trading

People are looking for a comfortable platform for the buying and selling of currencies. Solution: TraderGlobal, Forex Club.

IV Company management

1. Uncomfortable to communicate with banks

For many operations bank requires the personal presence of the client which is inconvenient. Solution: remote banking services - mobile applications, personal account on bank's website. Mobile banks Wells Fargo.

2. Small business owners need own bank service

People need bank specially designed for entrepreneurs. Solution: departments for companies in the banks.

3. High service cost of the bank's IT infrastructure

Bank's IT infrastructure requires large financial and time costs. Solution: Transfer data and processing of information to cloud - AWS, Azure.

4. It is difficult to support accounting for small business

For SMEs it makes sense to outsource non-core activities including bookkeeping. Solution: Online bookkeeping.

5. Companies need a platform for trading with each other

Need a place for buying and selling in the B2B-segment. Solution: Alibaba.

6. Microfinance companies need its own information system

Such companies need a transparent portfolio management system. Solution: Mambu.

7. Companies want to be closer to its clients

Maintaining existing customer is cheaper than attracting a new one. Solution: SMM, loyalty programs.

To understand how financial institutions earn the most (hint - credits) show the graph with profit structure of Deutsche Bank:

«Under each trend there are problems and various infrastructure changes that created these trends. The main factors that affect FinTech market are: 1) Regulation - new laws, new requirements of regulators; 2) New technologies - more information about the borrower, omnichannel, access to the client via smartphones; 3) Trends - demographic (changes in millennials behavior), consumer (transparency, simplicity).»

• Konstantin Stiskin Senior Investment Manager FinSight Ventures

«If we talk about trends in FinTech in this year we can see quick development of insurance tech. It begins to appear high-quality projects and corporate players who create own venture capital structures. We follow this trend from last year. There is a place to create value. In our view this sector needs new strong technological solutions.»

• Alexei Tuknov Investment Director Maxfield Capital

Sources:

Analytics of FinSight Ventures, Maxfield Capital, Mail.ru Group, iTech Capital Researches of fund Life.SREDA FinTech articles // Rusbase Fintech 50: The Future Of Your Money // Forbes The 15 hottest European fintech startups in 2015 FinTech startups in Y Combinator FinTech startups in IIDF (top Russian accelerator & venture fund) Startups are presented on FinTech Russia conference Retail Banking 2020. Evolution or Revolution? // PWC

Thanks for the help in the research: FinSight Ventures, Maxfield Capital, Mail.ru Group, iTech Capital