In today’s edition:
- Fed’s new payments system
- SoftBank’s $32 billion loss
- Uber and Waymo enter into a long-term partnership
- Inventory theft
US equities remained under pressure on Wednesday as the unresolved debt-ceiling issue persisted. With the June deadline set by Treasury Secretary Janet Yellen drawing near, investors are becoming more anxious as the impasse continues.
FedNow: Instant Payment or Financial Surveillance?
In July 2023, the Federal Reserve plans to launch the first government-backed payments system, FedNow. Direct bank transfers within the US typically take 3-5 business days. The new system will allow users to send or receive payments of up to $500,000 in their bank accounts within seconds without relying on 3rd-party services like PayPal, Zelle, Apple Pay, or Cash App. FedNow will be available to all financial institutions within the Fed’s network, and others can choose to opt-in.
Critics of FedNow have compared it to a Central Bank Digital Currency (CBDC) meant to replace cash. This has raised concerns that FedNow is a financial surveillance tool allowing the government to freeze anyone’s assets. Earlier this month, Florida Governor Ron DeSantis signed a bill banning CBDCs, describing them as “an attempt to surveil & control the finances of Americans.” However, the Fed has denied these allegations claiming any such currency would first need to be approved by Congress. The Associate Press has also confirmed that the new system will not grant the Fed any “additional surveillance or enforcement authorities.” Instead, it will only update the agency’s current system of processing payments.
SoftBank reported a significant loss of $32 billion from its Vision Fund, highlighting ongoing challenges in managing investment losses. The fund, backed by a $45 billion investment from Saudi Arabia’s PIF, was the world’s largest venture capital fund and made ambitious investments in companies like WeWork, Uber, DoorDash, and Klarna. SoftBank’s losses exceeded $66 billion, leading to divestments in profitable holdings, including Uber and Alibaba shares. The company is now looking to the IPO of Arm, in which it holds a 25% stake, for potential funds and is refocusing its investment strategy on artificial intelligence (AI).
Uber and Waymo are joining forces in a new partnership, marking Uber’s reentry into the self-driving car arena. After selling its autonomous vehicles research unit, Uber will leverage Waymo’s self-driving technology by incorporating their vehicles into its platform. This collaboration will enable Waymo to expand its testing efforts and offer autonomous rides and food delivery services. Self-driving cars are considered crucial to Uber’s future, and the ride-hailing industry is expected to be a key driver for the widespread adoption of autonomous vehicle technology.
Target, a major retail chain, is currently facing the challenge of inventory loss. Over the past year, the company has suffered a loss of $763 million as a result of shrinkage, and it is projected that this year’s losses will surpass $1 billion. One of the main factors driving this increase is the rise in organized retail crime, where complex networks engage in theft throughout the supply chain, including docks, trucks, railways, and stores. Interestingly, external theft only constitutes 37% of the inventory loss, while employee theft and process failures also contribute significantly to the problem.