Trends and Spends....and Fintech | TWIF UK & Europe

👋 Welcome to the new readers who’ve joined us since last week. You’re joining 176,000+ other subscribers who love fintech.

Hello fintech friends,

Last week on the Spanish Coast I witnessed a full 6 hour lightning storm. It was a mix of both Sheet and Fork lightning which was slightly unusual, and the length of it was abnormally long for someone whose grown up in the colder climes of Northwestern Europe. But what…ahem… struck me… wasn’t it’s duration rather it was the fact that I heard not a single rumble of thunder.

I actually didn’t realise that could happen. I always assumed one begets the other. And as I lay awake watching the storm unfold, Chat GPT told me that lightning always creates thunder. Its just sometimes you are too far away to hear that.

That’s kind of how I feel with AI; the lightning is striking. But the US and China are the epicentres, with a kind of legs akimbo flash bright enough for all to see, but the accompanying rumble still yet too distant from us in Europe to hear it. Sure we have politicians in the UK signing a piece of paper to say it's bad and let us control it. But it hasn’t meaningfully shown up in our lives yet.

Another trend I’ve started to notice is relating to climate change. In particular people's attitudes towards it. This is definitely a case of revealed vs stated preferences.

Triggernometry co-host Konstantin Kisin became a global thought leader during his Oxford Student Union debate around climate change by basically highlighting that in uncertain times families would look after their own. Moreover that people in general will solve for  immediate personal needs every single time over the collectivist and longer term needs of societies.

And (I’m getting to it’s relevance for fintech I promise) famed economist Milton Friedman once brilliantly articulated how a person’s needs are met less and less diligently depending on their proximity to the effort to produce and the consequence of their consumption.

Milton stated that there was four types of spending.

1. Your money, spent on you.
2. Your money, spent on others.
3. Other people’s money. Spent on you.
4. Other people’s money. Spent on others.

His point being, the diligence applied to the spend drop’s precipitously at relative to the cost and benefit to you at an individual level.

Spending your money on you. Much like when my Dad in the 1990’s would walk around the house turning lights off in any empty room, this is where a person feels very personally the cost and the value each expense brings. They worked to earn those funds and while they are are happy to spend for nice things for themselves, they always weigh up the cost and benefit of it.

Spending your money on other people, is similar in that you way up the efforts you went to to earn the funds, you might be slightly less concerned about the value it creates for the benefactor than you would if it were yourself.

Other peoples money spent on you will do the opposite. Say a Corporate card. This is where you the individual will be much more inclined to  worry more about the value you get vs the effort involved to earn the funds.

And lastly we have Other peoples money spent on other people. You didn’t earn it, so you wont care that much how its spent. And you aren’t spending it on yourself, so you are equally less likely to care about how much value it delivers.

That Milton Friedman says is the human condition. And the Government he argues is the ugliest form of it. Taxes being other peoples money. And Benefits, Subsidy and Investment being value for ‘the other.’

For personal expenditure shows the revealed preferences whereas Government investment often masquerades as a stated preference.

In fintech we can see this being applied based as follows having an agenda first:

Stated preferences of the populace would show that people care about Social Justice and the climate. So a slew of fintechs launched to deliver on this.

Backed by the Overton window, undoubtedly easier access to grant funding, Capital incentivised on deploying capital to solve these problems and more: But just look at what happened…

These business were solving for genuine issues that a market undeniably (if unquantifiably) existed for. But the cost of servicing these markets is regulatorily high — which means it’s actually high. And the subcategory of customers willing to pay for identity is vanishingly small. Moreover, if those same people could get an equivalent service for cheaper, even sans identity alignment, they would. So the very people whose “stated preferences” were causes for these causes, when confronted with a buying choice, chose “cheap” every time. (they were using their own money on themselves)

But the fintechs that were Grant funded and Cause funded, were largely using other people’s money on behalf of other people. And thus applied the lower diligence that exists in that space and delivered solutions to “stated preference” problems.

The real issue here is that Fintech is expensive. And the unit economics of it really don’t make themselves amenable to subsets of subsets of demographics. And those subsets themselves really just care about good quality at a good price, because they are spending their money on themselves.

Back to AI. Right now I feel we are in the ‘other people’s money on myself stage of AI. Namely engineers and AI pilled users are blasting through corporate funded token supplies with nary a glance to getting value. Undoubtedly there is something there. But name a business or a function that has clearly been transformed by it yet? I have yet to see the outcome in GDP or budget surplus. Not in cost cutting or product speed up.

Fintech, (like Europe) is a hyper regulated arena. With limited access to capital we simply wait and watch the lightning in the sky. It looks impressive. But I hear no boom. I see no supersonic Tsunami. Though the air of all industry sure feels thick with the static of an incoming lightning bolt, I really don’t know where its gonna strike.

Where fintech is concerned for the most part I think our participation is (pardon the pun) tokenistic. Most boards are simply cutting marketing spend and allocating it to AI. In some cases marketing budget is simply swapping from SEO to AIO. Basically optimising to be found in an LLM vs Google search.

AI is coming. AI is here. AI is everywhere all around us. But I feel like I can’t see or touch it. Or see or touch its real world implications.

I’m starting to feel like I’m Bruce Willis in the final scene of the sixth sense.

My Conclusion?

When we stand back to survey the landscape of modern technology and social trends, a striking pattern emerges across artificial intelligence, climate initiatives, and the fintech ecosystem. At the centre of this pattern lies the persistent gap between stated preferences and revealed preferences—a concept neatly demystified by Milton Friedman’s classic four-part framework of spending dynamics.

In the realm of sustainability and mission-driven fintech, we witnessed an era of high-minded promises. Consumers declared their intent to align their banking habits with green initiatives, social justice, and niche community values. Capital allocators, operating largely in Category 4 (spending other people’s money on other people) or Category 3 (spending other people’s money on themselves), enthusiastically funded these ventures. Yet, when individual consumers arrived at the actual purchasing decision—entering Category 1 (spending their own money on themselves)—their revealed preference dominated. They prioritised raw unit economics, low fees, and reliable service over ideological affinity. As our table of shuttered climate and mission-focused fintechs demonstrates, noble intentions rarely survive contact with consumer cost sensitivity.

Now, we see a parallel story unfolding with generative AI. We are currently living through a gold rush fueled predominantly by Category 3 and Category 4 spending. Enterprises, venture capitalists, and technology leaders are pouring vast reserves of corporate capital into massive token usage, infrastructure buildouts, and reallocated marketing budgets—often swapping traditional search engine optimization for AI optimization simply to keep up with the narrative. The skies are illuminated with the flash of technological promises, yet on the ground, the measurable economic impact—in productivity surges, budget surpluses, or bottom-line revenue—remains faint. The thunder has not yet arrived because the vast majority of end users have not fully transitioned from curiosity to Category 1 valuation.

For fintech and broader industry players, the lesson is clear: long-term sustainability cannot rely indefinitely on subsidised capital or stated preferences. Just as green fintechs learned that affinity alone cannot offset high regulatory costs and slim margins, AI-driven solutions will eventually face the ultimate test of revealed preference. When the wave of subsidised access wanes and end users must spend their own money on AI capabilities to solve their own concrete problems, only solutions delivering undeniable efficiency and tangible economic return will survive.

Ultimately, if contemplating climate tech, financial infrastructure, or artificial intelligence, we must distinguish between the flashing lights of stated ambitions and the real economic thunder of revealed behaviour. Innovation thrives not when it appeals to what people say they care about in theory, but when it delivers disciplined value to what they consistently pay for in practice.

Follow the spend! not the Investment!

- Daniel

SPONSORED

EMEA identity framework analysis provided by Veriff.

From Europe’s eIDAS 2.0 framework to the UK’s digital right-to-work guidelines, regulatory shifts across EMEA are accelerating the transition toward reusable digital IDs. Designed specifically for the online world, app-based digital credentials allow users to verify attributes via selective disclosure, sharing only necessary details without exposing full personal data. Veriff breaks down how digital IDs streamline cross-border compliance and real-time data updates while countering advanced AI-driven fraud. Get the insights on how digital documents are shaping the future of identity verification.

Word of the Week: Bumfuzzle - To confuse, perplex, or flustered someone.

Thanks for reading!