Good morning readers. Federal Reserve Chair Jerome Powell said on Monday that he’s pleased with the progress the Fed is making with inflation but also mentioned he isn't ready to cut interest rates just yet. Speaking at a forum in Portugal, JPow emphasized the need for confidence that inflation is sustainably moving towards the 2% target before making a move. With inflation now at 2.6%, down from 4% a year ago, its clear the Fed still remains cautious in its approach. Markets have adjusted expectations for rate cuts, now anticipating two reductions this year. No specific rate cut dates were given.

Let’s jump into today’s storylines.

In today’s digest:

• When fintech’s can’t live up to their promises

• Headline Hustle: Top Democrats have asked Biden to ‘step aside’ after debate against Donald Trump, Skydance strikes a preliminary deal with Paramount to take over, FTC blocks Tempur Sealey’s $4 billion acquisition of Mattress firm

• Google’s AI goals pose a big environmental risk

• Pulse Points: What’s Trending

BANKING

Fintech’s promises fall short

Jumping into the digital banking world promises a lot of conveniences, but for users of Yotta and similar platforms, a significant hiccup turned that promise into a headache.

Fintech, short for financial technology, has modernized how we manage our money, making it fun with app-based banking that feels more like a game than a chore. But when tech provider Synapse went bankrupt, it triggered a major issue for customers: suddenly, they couldn't access their money.

The issue exposed a big risk with fintech

While these platforms operate like banks and offer perks and easy access to our funds, they rely on partnerships with actual banks and other service providers to work properly. This setup can make things complicated, especially when one of the links in the chain breaks down, as happened with Synapse. When it failed, over 100,000 Americans found themselves locked out of their accounts, with a total of $265 million just out of reach.

Experts are now raising their concerns over the banking-as-a-service (BaaS) model, where fintech’s like Yotta connect with real banks through intermediaries like Synapse.

• Unlike traditional banks, which have a long history and regulations designed to protect customers' money, fintech companies often depend on various partnerships to provide their services.

• This can introduce an element of uncertainty that might not exist with a conventional bank, where customer protections like FDIC insurance—a government guarantee that protects deposit accounts—are more straightforward.

The industry's response has been mixed. While some advocate for direct banking relationships, others in the sector push for a nuanced regulatory approach that recognizes the unique risks of fintech collaborations. The fallout has regulatory and industry leaders reevaluating the BaaS framework, which had been lauded for democratizing financial services but now faces scrutiny for its operational vulnerabilities.

Looking ahead…the future of fintech will likely depend on how well these companies can enhance their stability and security. For now, though, the recent troubles have shown that when it comes to managing our money, the newest technology might still have some catching up to do with old-school banking's reliability.

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IN THE KNOW

Headline Hustle

🗣️ Top Democrats have asked Joe Biden to ‘step aside’ after debate with Donald Trump. Following a difficult debate performance, Democratic leaders, including Rep. Lloyd Doggett, are urging President Joe Biden to step aside for the party’s and country’s benefit. Despite these calls, Biden remains steadfast, planning further campaign activities. High-profile Democrats are reassessing his ability to win, with some suggesting increased public engagement to demonstrate his fitness for office. The debate has intensified scrutiny on Biden’s leadership, affecting party strategy and public perception.

🤝 David Ellison’s Skydance to acquire National Amusements and merge with Paramount. David Ellison’s Skydance has a preliminary deal to buy National Amusements for $1.75 billion and merge with Paramount Global, subject to Paramount’s special committee approval. National Amusements, owning 77% of Paramount’s voting shares, has referred the deal for review. The agreement includes a 45-day period for other bidders. Paramount faces financial struggles, including debt and declining cable business. Skydance’s proposal aims to inject $1.5 billion into Paramount to alleviate debt.

🛏️ FTC blocks Tempur Sealy's $4 billion acquisition of Mattress Firm. The Federal Trade Commission (FTC) voted to block Tempur Sealy's $4 billion acquisition of Mattress Firm, citing concerns over competition and pricing. The FTC argued that the deal would grant "enormous power" in the mattress supply chain, potentially harming consumers and competitors. Tempur Sealy defended the transaction, stating the bedding industry remains competitive. Both companies expressed disappointment but expect litigation to resolve within months, aiming to finalize the deal by late 2024 or early 2025.

ENVIRONMENT

Google's AI growth spurs environmental concerns

Google’s sprint into the world of artificial intelligence (AI) is hitting an environmental snag. According to its latest report, while the company aimed to cut its greenhouse gas emissions by half by 2030, it’s actually seen a 48% increase since 2019. Last year alone, Google's activities added 14.3 million metric tons of carbon dioxide to the atmosphere—the same amount you'd expect from 38 gas-fired power plants over a year.

AI requires a lot of energy

This rise in emissions mainly comes from the energy demands of Google’s data centers, which are especially high as they train more complex AI models. In fact, in 2023, just the electricity used by these data centers added nearly a million metric tons to Google’s carbon footprint, making it the largest single contributor to their increased emissions.

Despite these challenges, Google is working hard to lessen its environmental impact.

• The company is focused on making its AI models, hardware, and data centers more energy efficient. Google also aims to use carbon-free energy 24/7 for all its operations by 2030.

• But with AI’s energy consumption predicted to skyrocket in the coming years, Google—and the entire tech industry—faces tough decisions on how to continue innovating while also protecting the planet.

Not the only one: Google’s got company on the bumpy road to a greener future. Microsoft, too, finds itself in a bit of an eco-pickle, with greenhouse gas emissions puffing up about 30 percent in its 2023 fiscal year compared to 2020.

SNIPPETS

Pulse Points

• Netflix is proceeding with its plan to phase out its cheapest ad-free tier for existing subscribers, as evidenced by multiple Reddit posts indicating that Netflix is now asking some basic plan subscribers to select a new plan to continue their subscription.

• Space X wants to launch its next-gen rocket up to 120 times a year from Florida — and people aren’t loving it.

• The number of available jobs in the U.S. unexpectedly increased in May, indicating ongoing resilience in the nation's labor market.

• Jamie Foxx opens up and shares new details about the health scare that left him ‘gone for 20 days’.

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