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He Came, He Saw, He Got Thrown Out

Many rising entrepreneurs have beaten a path to Africa down the years. Kamal Budhabhatti is one of them. He turned the ignominy of deportation into a multimillion-dollar success.

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Eleven years ago, a 25-year-old Indian from Gujarat came to Kenya seeking greener pastures. He found a job as an accounting clerk in an Indian-owned polythene manufacturing company for Ksh18,000 ($230) a month. In his spare time, he decided to write software for an extra buck; but his employer discovered his private project. The penalty was costly. He reported to work one morning and was handed a one-way air ticket back to India. His former employer drove him to his house, ordered him to pack, drove to the airport and made sure he boarded the plane. As the plane roared above the suburbs of Nairobi, Kamal Budhabhatti looked wistfully through the window and made a silent pledge. He came, he thought, had seen and he was going to conquer Kenya.

Eleven years later, Budhabhatti can claim to have conquered, as he is one of Kenya’s youngest multi-millionaires. He pioneered the business of software development in East Africa and plans to create a Silicon Valley in Africa. Budhabhatti runs one of East Africa’s fastest growing software development companies—Craft Silicon—with its head office in Nairobi.

Budhabhatti is a techie through and through. He graduated with a BSc degree in Physics and describes himself as a hands-on programmer who makes money out of what he enjoys. “Nobody in my family is a business person and it was not really in my cards to get into business. However, the only link I may have to entrepreneurship is that I come from a region in India that is considered very entrepreneurial,” he explains.

India’s Gujarat state is the home of famous entrepreneurs—among them, Dhirubhai Ambani, the founder of Reliance Industries, that was ranked 134 in the 2011 Fortune 500 list.

Wealth is a far cry from Budhabhatti’s lean first days in Kenya in a clerical job.

“All I used to do was input invoices in the system. It was not what I had expected, and I developed a great dislike for the job. Every day I used to say I needed to do something better. I had a friend where I used to stay who was the IT manager of a local bank. He was looking for someone to come up with a system that would automate the check clearing system. I asked him if I could write something and he said, ‘why not?’”

Budhabhatti had landed his first job as an entrepreneur.

A decade ago, Kenya’s ICT sector was in its infancy. Internet and computers were a luxury few could afford. There was little investment or infrastructure and companies like mobile operator Safaricom were just setting up shop. When it came to technology, Africa was not taken seriously—the US, home of Microsoft, HP, IBM, Symantec and Oracle, largely ignored Africa.

Budhabhatti knew he was onto something.

“These problems that Africa has are the greatest opportunity because if you go to some of the developed economies, they have lesser problems. Because of all these problems that we have here, they present a lot of opportunities to come up with solutions. It’s like playing computer games: if there are no challenges in the game, then it becomes boring. Challenges push you to the limit in terms of thinking and innovation,” he says.

After his forced return to India, Budhabhatti spent 72 hours brooding at home before flying back to Kenya.

“I asked my sister to pay for my ticket back because I felt there was an opportunity here and just had to come back. I had Ksh23,000 ($295) in savings which I survived on for one-and-a-half years!”

Budhabhatti returned to where he was staying as a paying guest, explained his situation to the landlady and she allowed him to stay without paying rent. He says he survived on the good humour of his friends, who often paid for his meals.

“I went back to the bank, but the bank realized I was desperate and took advantage of me by renegotiating the price we had agreed on. Every time I went to follow up on the status, they would say come back tomorrow. I finished making the software after one-and-a-half years and was paid Ksh200,000 ($2,550).”

Budhabhatti used the money to settle his debts and set up Craft Silicon. From there, he embarked on an entrepreneurial journey that saw his company win $100,000 at the 2010 Africa Awards for Entrepreneurship.

Craft Silicon sells software to banks and micro-finance organisations in 40 countries around the world, including China and India.

“Banks talk to each other and since I was cheap, a lot of the small banks thought there was no point investing a lot of money in buying an expensive product.”

As word got round, banks like Equatorial Commercial Bank, KRep and Equity Bank asked Craft Silicon to develop software for them. That led to the making of Craft Silicon’s first solution—Bankers Realm—an automated banking operating system.

Like Steve Jobs at Apple, Budhabhatti rolls up his sleeves and gets his hands dirty. In 2011, he launched his brainchild, Elma, an online way to move cash and transact.

After a decade of doing business, Budhabhatti has created a multimillion-dollar empire.

“To calculate software valuation, you look at a company’s annual turnover in terms of how many licensed softwares you are selling, then multiply by 20,” he says.

In 2010, Craft Silicon’s turnover was $6 million, which translates to $120 million. Budhabhatti’s bet on technology has paid off.

 

Kamal Budhabhatti’s Investment Tips

Planning to invest in a technology business in Kenya? This is what to keep in mind:
• Understand the emerging economy, especially if you are coming from a developed economy, as you may not understand solutions required in these countries. Understand local solutions and provide them.
• Keep in mind the governance structures, especially legislation about intellectual property (IP). These are things you will have to keep fighting every day. Laws here are still not strong in terms of IP.
• Don’t expect a very high return. Most people think since they are investing in a high risk environment, they will get a high return—manage your expectations from day one.
• Currency fluctuation is a major risk. Ensure you have a way to manage that.

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Forbes Africa | 8 Years And Growing

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As FORBES AFRICA celebrates eight years of showcasing African entrepreneurship, we look back on our stellar collection of cover stars, ranging from billionaires to space explorers to industrialists, self-made multi-millionaire businessmen and social entrepreneurs working for Africa. They tell us what they are doing now, how their businesses have grown, and where the continent is headed. 

Since its inception in 2011, and despite the changing trends in the publishing industry, FORBES AFRICA has managed to stay relevant, insightful and sought-after, unpacking compelling stories of innovation and entrepreneurship on the youngest continent, in which 60% of the population is aged under 25 years.

 Many of those innovations have been solutions-driven as young entrepreneurs across the continent seek to answer questions that have burdened their communities.

 Always on the pulse, FORBES AFRICA has chronicled and celebrated those innovations – prompting the rest of the globe to pay attention and be fully engaged.

 A prime example of this is the annual 30 Under 30 list, which showcases entrepreneurs and trailblazers under the age of 30 from business, technology, creatives and sports. In 2019, we had 120 entrepreneurs on the list, finalized after a rigorous vetting and due diligence process to well laid down criteria.

 We have always maintained the highest standards of integrity in all our reporting.

 As we transition into the next milestone, FORBES AFRICA reflects on the words of civil rights activist Benjamin Elijah Mays, who once said: “The tragedy of life is not found in failure but complacency. Not in you doing too much, but doing too little. Not in you living above your means, but below your capacity. It’s not failure but aiming too low, that is life’s greatest tragedy.”

 With the transformation in the media landscape, the recent awards given to the magazine for the work done by a hard-working, determined and youthful team, serve as a reminder that we are doing something right.

 Early this year, FORBES AFRICA journalist Karen Mwendera received a Sanlam award for financial journalism as the first runner-up in the ‘African Growth Story’ category. In January, FORBES AFRICA’s Managing Editor, Renuka Methil, received the ‘World Woman Super Achiever Award’ from the Global HRD Congress.

 In reflecting on the last eight years, this edition revisits a few of the strong, resilient men and women who have graced our covers.

For some, fortunes have literally changed, as witnessed in the fall of gargantuan African empires such as Steinhoff. Of course, there have been massive moments of triumph too, which have seen some new names feature on the annual African Billionaires List. There have also been moments of tragedy with former cover stars passing away.

 Africa is ripe for the taking and is seen as the next economic frontier. The unique position the continent finds itself in will no doubt give FORBES AFRICA plenty to report on. Here’s to more deadlines and debates for the next eight years.

– Unathi Shologu

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Entrepreneurs

Having A Ball With Data

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Stephan Eyeson started a basketball business at the age of 19. That venture failed, so he tried the data business instead. He is working and playing hard.


First, the facts.

Africa has a data problem. For all the talk about data being the new oil, the continent comprises about 12.5% of the world’s population but only accounts for less than 1% of research output, according to global information and analytics firm, Elsevier.

And Survey 54, an AI mobile survey platform solving the problem of data collection on the continent, wants to offer a solution. Founded by Stephan Eyeson, Survey 54 focuses on providing good quality data essential for governments and private businesses to accurately plan, fund and evaluate their activities.

READ MORE | Owning The African Narrative

“Data in Africa is such a prevalent problem, in a sense of when you are going to start up a business, it is hard for you to get consumer data on say ‘how many people eat out in Lagos every day? what is the transactional value? what are the types of things that people eat? what do they want to eat etc?’ All these things are available in the West but for people who want to move into Africa for business, how do they get their data to make their decisions and how do we make it really easy for them and not just for a startup but for even governments and larger businesses,” says Eyeson.

Fresh out of a master’s program in innovation and management from Loughborough University in the United Kingdom (UK), Eyeson joined Survey Monkey, an online survey development cloud-based software as a service company, as part of the team responsible for building their enterprise function in London as well as looking after customers in the EMEA (Europe, Middle East and Africa). After learning the ropes, he decided to branch out to start his own company to offer a more robust and tailored solution for the African market.

“For people who want to move into Africa for business, how do they get their data to make their decisions and how do we make it really easy for them?”

“The problem around data in Africa and emerging markets is a massive one. So, for us, it’s about how do we become a data platform not just for a company but for governments to help them understand their people easier.”

Data is the first step. Then you need intelligence around that data to enable you to make objective analysis that will shape your decision-making process, as well as provide the foundation for policy-making and budgeting.

“Instead of hiring an agency to go to Ghana and do a face-to-face interview, for example, we look at how governments can get mobile data faster and then how they are able to manipulate that data to get the results they need,” says Eyeson.

READ MORE | The $100 Trillion Opportunity: The Race To Provide Banking To The World’s Poor

Due to the dearth of knowledge, Eyeson’s unique understanding for the data space is relied on by many startups and larger businesses who depend on his expertise to drive results in Africa.

“Stephan has great expertise in strategy and high-level corporate business development. Survey 54 has and will be instrumental for companies to make decisions within Africa and emerging markets, making it easier to use and understand consumer data. A platform like Survey 54 is essential for companies operating on the continent,” says Nana Adomako, head of UK & Ghana growth at Taptap Send.

Born to Ghanaian parents in London, Eyeson’s first stint at entrepreneurship began in his early years at university, when his dream to become a professional basketball player was shattered.

“I had a scholarship into America for basketball and that scholarship was taken away due to some technicality with my results so I couldn’t go and so I started a basketball business instead when I was 19. It helped Americans play in Europe and Europeans play in America. I made the system easier. So, players paid a monthly fee to get seen and coaches paid to get access to talent.”

But unfortunately, the business failed to take off because the market was not big enough for Eyeson to remain profitable.

The data business, on the other hand, is huge: worldwide revenues for data and business analytics are forecast to reach $189 billion this year and $274.3 billion by 2022, according to technology market research firm IDC. Even though Survey 54 is in its first full year of business, the company has already secured contracts with multinationals like Colgate, amongst many others.

READ MORE | A Germ Of An Idea

“I was one of Survey 54’s first clients and it has been a pleasure watching Stephan grow the company into what it is today, working with some of the world’s largest brands.

“There is a significant lack of data in the region so the need for a sophisticated data insight product is essential and I believe Stephan’s mission-driven leadership style will enable the company to become one of the largest software businesses driving investments to the content,” says Yvonne Bajela, Principal and Founding Member at Impact X Capital.

The company has recently secured a spot on the coveted Startupbootcamp platform in Cape Town. While Survey 54 is trying to secure a first-mover lead in data on the continent, challenges remain. As the company scales, they will need to overcome the language barrier across the African continent and learn to interpret data by bringing the cultural context into the surveys organizations are seeking.

Eyeson has his eyes set on moving into the US markets as a long-term plan, but for now, the goal is transferring the abundant and ubiquitous asset of data in Africa into millions for his startup.

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Entrepreneurs

The $100 Trillion Opportunity: The Race To Provide Banking To The World’s Poor

Companies like Tala are at the forefront of the race to deliver rudimentary financial services to the 1.7 billion people on the planet who lack even a bank account.

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Two years ago, Amylene Dingle lived with her husband and 7-year-old daughter in Payatas, an impoverished Manila neighborhood with the largest open dump site in the Philippines. Her husband worked on the security staff in a government building, earning 4,000 pesos a week, the equivalent of $80. She had always wanted to start a business, but she was unemployed, had no money saved, no credit history and couldn’t get a credit card or a bank loan.

Dingle’s fortunes took a dramatic turn after she responded to a Facebook ad for Tala, a Santa Monica-based startup that makes small loans through a smartphone app. After granting Tala access to her phone, through which the app cleverly parses mobile data to assess a borrower’s risk, she got a 30-day, $20 loan. She paid 15% interest and used the money to buy cold cuts, hamburgers and hot dogs. She marked them up 40% and sold them door-to-door, earning $4 in profit after paying back the interest and a small processing fee.

Loan Ranger: Tala founder Shivani Siroya at her startup’s Santa Monica headquarters. She uses cellphone data to establish creditworthiness for people rejected by banks in the developing world. ROBERT GALLAGHER FOR FORBES

Today Tala lends Dingle, 42, $250 a month for her now thriving food business. Her $70 in weekly profits have nearly doubled her family’s income and funded their move to a two-bedroom home in the quiet, clean Batasan Hills district. Tala is thriving, too. Founded in 2011 by Shivani Siroya, a 37-year-old former Wall Street analyst who had worked at the United Nations, it has raised more than $200 million from top U.S. investors, including billionaire Steve Case’s Revolution Growth fund. With estimated 2019 revenue of more than $100 million, Tala is valued at close to $800 million.

Companies like Tala are at the forefront of the race to deliver rudimentary financial services to the 1.7 billion people on the planet who lack even a bank account. Providing them with the basics of credit, savings and insurance is one of the great challenges and opportunities of the century. With access to the financial system, people can buy a car or a home. They don’t have to resort to loan sharks if they face a medical emergency. They are happier. They live longer. They are more productive, and their increased productivity will help lift their nations out of poverty. Serving the unbanked will generate some of tomorrow’s largest fortunes. It is both capitalism’s moral imperative and the route to one of the most significant untapped markets.

While the unbanked pay for everything in cash, an even larger swath of people, the more than 4 billion “underbanked,” may have accounts but struggle to make ends meet, racking up steep fees when checks bounce and resorting to high-interest alternatives like payday loans. Traditional banks alone could boost annual revenue by at least $380 billion if they turned all the unbanked into customers, according to a 2015 Accenture report.

The multiplier effects are staggering. The GDP of emerging-market countries would surge $3.7 trillion by 2025, or 6%, if they adopted a single innovation—switching from cash to digital money stored on cellphones, McKinsey estimated in 2016. Diego Zuluaga, an analyst at the Cato Institute’s Center for Monetary & Financial Alternatives, has studied the likely effects of full financial inclusion: “If we were to give the unbanked and underbanked in the developing world the same kind of access to credit and investments that we have in rich countries, you could easily create an additional $100 trillion in financial assets over the next 50 years.”

 
Tala founder Siroya was raised by her Indian immigrant parents, both professionals, in Brooklyn’s gentrified Park Slope neighborhood and attended the United Nations International School in Manhattan. She earned degrees from Wesleyan and Columbia and worked as an investment banking analyst at Credit Suisse and UBS. Starting in 2006, her job was to assess the impact of microcredit in sub-Saharan and West Africa for the UN. She trailed women as they applied for bank loans of a few hundred dollars and was struck by how many were rejected. “The bankers would actually tell me things like, ‘We’ll never serve this segment,’ ” she says. 

Where banks saw risk, she saw opportunity. For the UN, she interviewed 3,500 people about how they earned, spent, borrowed and saved. Those insights led her to launch Tala: A loan applicant can prove her creditworthiness through the daily and weekly routines logged on her phone. An applicant is deemed more reliable if she does things like regularly phone her mother and pay her utility bills on time. “We use her digital trail,” says Siroya.

Tala is scaling up quickly. It already has 4 million customers in five countries who have borrowed more than $1 billion. The company is profitable in Kenya and the Philippines and growing fast in Tanzania, Mexico and India.

Rafael Villalobos Jr.’s parents live in a simple home with a metal roof in the city of Tepalcatepec in southwestern Mexico, where half the population subsists below the poverty line. His father, 71, works as a farm laborer, and his mother is retired. They have no credit or insurance. The $500 their son sends them each month, saved from his salary as a community-college administrator in Moses Lake, Washington, “literally puts food in their mouths,” he says. 

To transfer money to Mexico, he used to wait in line at a MoneyGram kiosk inside a convenience store and pay a $10 fee plus an exchange-rate markup. In 2015, he discovered Remitly, a Seattle startup that allows him to make low-cost transfers on his phone in -seconds. 

Immigrants from the developing world send a total of $530 billion in remittances back home each year. Those funds make up a significant share of the economy in places like Haiti, where remittances account for more than a quarter of the GDP. If all the people who send remittances through traditional carriers, which charge an average 7% per transaction, were to switch to Remitly with its average charge of 1.3%, they would collectively save $30 billion a year. And that doesn’t account for the driving and waiting time saved. 

Remitly cofounder and CEO Matt Oppenheimer, 37, was inspired to start his remittance service while working for Barclays Bank of Kenya, where he ran mobile and internet banking for a year starting in 2010. Originally from Boise, Idaho, he earned a psychology degree from Dartmouth and a Harvard M.B.A. before joining Barclays in London. When he was transferred to Kenya, he observed firsthand how remittances could make the difference between a home with indoor plumbing and one without. “I saw that $200, $250, $300 in Kenya goes a really, really long way,” he says.

Oppenheimer quit Barclays in 2011 and together with cofounder Shivaas Gulati, 31, an Indian immigrant with a master’s in IT from Carnegie Mellon, pitched his idea to the Techstars incubator program in Seattle, where they met Josh Hug, 41, their third cofounder. Hug had sold his first startup to Amazon, and his connections led them to Bezos Expeditions, which manages Jeff Bezos’ personal assets. The fund became one of Remitly’s earliest backers. To date, Remitly has raised $312 million and is valued at close to $1 billion.

Oppenheimer and his team can keep fees low in part because they use machine learning and other technology to bar terrorists, fraudsters and money launderers from transferring funds. The algorithms pose fewer questions to customers who send small sums than they do to those who send large amounts.

Remitly transfers $6 billion a year, serving senders in 16 countries, including the U.S., Australia and the U.K., and recipients in 45 nations. In the first half of 2019 it added 15 receiving countries, including Rwanda and Indonesia. The company is not yet profitable, but last year estimated revenue came to $80 million. Oppenheimer sees a huge growth opportunity. Fewer than 1% of the world’s 250 million immigrants are Remitly customers. 

In 2012, Dorcas Murunga lived in Gachie, a crime-ridden neighborhood on the outskirts of Nairobi. She earned $80 a month babysitting and cleaning houses, and her husband made $120 installing elevators. He covered most of their expenses while she struggled to save money. Whenever she had cash, she says, she spent impulsively on clothes, junk food and alcohol. She managed to put aside the $5 minimum balance required to open a savings account at Equity Bank of Kenya, but she had a hard time coming up with the $3 monthly fee. To make a deposit, she took a bus an hour each way and waited in line for an hour at the bank. She closed the account after just one year. 

Like most Kenyans, Murunga was already using M-Pesa, a service created by Safaricom to send money via text message. In 2012, Safaricom, a subsidiary of British telecom giant Vodafone, introduced M-Shwari, a savings account and loan service it integrated into M-Pesa. Two years later, it started offering an account that locked up a customer’s funds for a fixed period at a fixed interest rate.

Determined to improve her finances, Murunga committed to saving $1 a day through her locked account. When she got the urge to buy vodka or a pair of shoes, she says, she’d make deposits through her phone instead. She cut her spending by two thirds, to $10 a week. By 2016, she was saving $300 a year. She had started a business making handbags, and the savings helped pay for design courses. She has invested in real estate with her husband and says she spends more than $200 a year helping friends and family. 

The spark for M-Pesa (pesa means money in Swahili), the first mobile money provider in Africa, came in 2003 from Nick Hughes, a Vodafone executive who managed a five-person team tasked with creating wireless products with a social impact. Hughes’ idea: set up a digital money-transfer system that would operate through personal cellphones.

Since M-Pesa launched in 2007, it has exploded in size and popularity. Kenyan taxi drivers complain when riders try to pay in cash. Ninety-six percent of Kenyan households now transact through M-Pesa. Before M-Pesa, only 27% of Kenya’s then 38 million people had bank accounts. Kenya’s population has since risen to 51 million, and 83% have checking or savings accounts. The service has spread to eight countries, including Egypt and India. Sending less than 50 cents is free. M-Pesa charges 1% to 2% for larger amounts. Through its various subsidiaries, M-Pesa generates some $840 million in annual fees for Vodafone.

The adoption of M-Pesa has had a tremendous impact on Nairobi’s startup scene. Durable-goods providers have introduced pay-as-you-go plans that bring in millions of new customers. For example, three-year-old Deevabits, based in Nairobi, sells $80 home solar systems in remote villages with no access to electricity. All its customers use M-Pesa to make an initial deposit. They pay the remainder through M-Pesa in 50-cent daily increments over eight months. “The presence of M-Pesa has transformed how business is done in Kenya,” says Deevabits founder and CEO David Wanjau, 32. “We couldn’t operate without M-Pesa.”

Dixie Moore used to strain to make paychecks last to the end of the month. A 25-year-old single mother with two small children, she earns $12.25 an hour as an assistant manager at a Bojangles’ fast-food restaurant in Canton, Georgia. In 2011, she was paying $30 a month for a Wells Fargo checking account, but when a bounced check and multiple overdraft fees left her with a $1,200 negative balance, she lost the account. She regularly paid up to $6 to get her paychecks cashed. “I was stuck between a rock and a hard place,” she says. Then a friend told her about MoneyCard, a Walmart-branded product offered by Pasadena, California–based Green Dot, the largest provider of prepaid debit cards in the U.S. Now her employer deposits her paychecks directly onto the card, and she uses it to pay for everything from groceries to dentist appointments. “It has really been a blessing,” she says. 

Green Dot offers a financial lifeline to people like Moore. Until she started using the card two years ago, hers was among the 7% of American households—representing some 14 million adults—that get by entirely on cash. Founded in 1999 by a former DJ named Steve Streit, the company initially focused on teenagers who wanted to shop online. But seeing a larger opportunity, in 2001 Green Dot shifted its focus to adults who were using the card because they had bad credit or couldn’t afford commercial bank fees.

One advantage of cash cards: When users spend all the money on their card, it’s like running out of paper cash. They avoid overdraft fees that can run as high as $35 for a single infraction. The cards also make it possible for users to buy online.

Streit, 57, says that nearly 40% of Green Dot’s 5 million customers were previously unbanked.

In 2007, he struck a deal with Walmart that was a boon for the chain’s then 130 million customers: a cash card with a monthly fee of just $3 (today it’s $5). That’s down from the nearly $8 monthly fee paid by users who bought their cards at stores like CVS. The surge in Walmart card sales helped make up for the shortfall from the lower monthly charge.

In 2010, Streit took the company public. Though Green Dot generated revenue of $1 billion last year, its stock slid 40% this past August as it lowered its revenue expectations, citing the increase in well-funded competitors entering the market. But bad news for Green Dot is good news for America’s unbanked. Smartphone-based cash offerings from venture-backed startups like Chime, a six-year-old digital bank based in San Francisco, and digital-payment company Square’s Cash App are signing on millions of customers.

Harvard Business School professor Michael Chu, a former partner at KKR who cofounded Mexico City-based Compartamos, Latin America’s largest microfinance lender, says the opportunity to serve the underbanked in the U.S. is “huge.” But paradoxically, the richest nation on earth poses some of the greatest barriers to financial-inclusion innovators. A patchwork of state laws intended to protect borrowers from predatory lenders and federal laws that guard against money laundering requires startups to navigate through a maze of red tape.

Another problem: The technology that transfers funds between U.S. financial institutions is old, slow and expensive. While M-Pesa zips mobile money across Kenya in seconds at virtually no charge, an electronic fund transfer from Miami to New York can take two days and cost as much as $40. 

But in the grand scheme these are minor obstacles. The Fed has promised to build a new and improved U.S. transfer system by 2024. Entrepreneurs will lobby—or innovate—their way around the bureaucratic barriers. After all, there are billions of dollars to be made—and countless lives to improve.

By Jeff Kauflin, Fintech, Forbes Staff and Susan Adams, Education, Forbes Staff.

Additional reporting by Anna Corradi.

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