Blockchain use is increasing. AI technology is developing. What effect does this have on the LegalTech industry? How does this relate to activity in fintech? Why do people talk about blockchain so much?
Because it is the answer to many questions, one such question is cyber security. Raconteur in its special ‘Legal Innovation’ report found that cyber security is the biggest technology issues facing law firms, and that blockchain’s main attraction is security.
Artificial intelligence is the ‘new law graduate’
The aim effect of this on the financial industry is quicker and cheaper legal services when the work is done by an algorithm rather than a 22-year old. Technology assisted review (TAR) uses AI to predict how relevant a document will be to a particular case. The British High Court’s early adoption of the technology demonstrates an extremely positive attitude towards legaltech by legal institutions.
In a law firm, blockchain technology will greatly impact commercial and dispute resolution law. Add AI to blockchain systems and due diligence checks or contract legal work can be completed without lawyers, the industry speculates. Like many sweeping statements about the technology, this disruption is years away; so what are some present day use cases for blockchain and AI in legaltech?
Use cases for tech in law include:
- Smart contracts can infer when the parameters of the contract are exceeded and payment, penalties or cessation are automatically triggered. This means when a service is not delivered, the customer automatically is not required to pay.
- Intellectual property law could use the blockchain to code royalty payments, ensuring artists are automatically paid their dues.
- Property law would benefit from tech by making the chain of custody much easier to understand if blockchain encrypts transaction history.
How does this affect the fintech industry?
If early embracers of blockchain technology in the legal sphere link with smaller blockchain developers, they could create joint solutions and leverage a competitive advantage. The smart contract arena has much practicality in fintech; all financial exchanges are in some sense a contract, quid pro quo.
Adopting blockchain technology also fights fraud and data breaches, two incredibly valid concerns in the financial and legal industries. Using blockchain allows users to share data without putting that data at risk of fraud.
Borderless transactions also pose a challenge for the legal industry. Traditional national jurisdictions no longer apply to borderless transactions on the blockchain. New areas of law and legaltech will need to be adapted for this challenge.
Our Legal Tech Essentials covers the main themes of this strand of fintech.
By Grace Appleford, Research Analyst.