von Viktor von Essen, Merantix
The phenomenon of legal tech (i.e. applying technology to legal workflows) is nothing new. The term has been around since the 1970s, when the first legal databases were developed. Although financial institutions have been early adopters of legaltech solutions, whether in compliance, risk management or data analytics, we so far have not seen the large-scale transformation of the legal industry that’s been promised for so long. In this article, we explore why this time might be different, particularly in the financial sector.
The advancement of Large Language Models (LLMs) represents a paradigm shift in the realm of legal technology, ushering in a transformative era. As leaders in AI adoption, many financial institutions already use AI to streamline operations and improve service quality. LLM-based legaltech applications will allow the legal departments to do the same. Let’s dive deeper and explore the most promising ones:
- Drafting Legal Documents: This could range from simple contracts to more complex legal documents. AI can assist by standardizing documents, ensuring they adhere to relevant laws, and making suggestions to improve clarity.
- Extracting Information from Legal Documents: AI can swiftly sift through mountains of data to extract relevant information, something that would be time-consuming for a human.
- Asking Questions (Legal Q&A): Whether it’s a basic legal query or more intricate matters, AI can provide instant answers and back them up.
- Summarization: Legal documents are notorious for their length. AI can distill these documents into concise summaries, preserving the core information.
Specific Use Cases:
1. Simplifying Legal Complexities – AI-counsel: financial institutions face very complex and extremely strict regulatory requirements. Instead of immediately turning to a lawyer to navigate this environment, AI-powered chatbots can become your guide through the legal intricacies. This applies equally to navigating internal guidelines and standards, easing the pressure on in-house legal departments. A caveat, though: Legal regulations vary, and while AI can provide information, the line between „legal information“ and „legal advice“ is thin. Given recent shifts in legal markets, like in Germany, there could be more room for AI in the future.
- Legal OS – on-demand in-house counsel bot, answering any legal query (backed by SpeedInvest and HV Capital)
2. Legal Workflow Optimization: One of the most valuable features of modern AI applications is enabling an acceleration of cumbersome processes, while maintaining full visibility. With contract lifecycle management tools for example, an organization can ensure that all agreements are updated and contain approved clauses, allowing the legal team to track all developments. The risk visibility is enhanced, which can lead to streamlined collaboration across departments and save time and costs. KYC and risk monitoring processes are yet another example of processes where AI enables maintaining a dynamic view of your threats, risks, controls and vulnerabilities in one centralized platform.
- Ironclad: Contract lifecycle management platform used by companies to handle every type of contract workflow. (backed by Accel and SEQUOIA)
- Luminance: Document review empowered by supervised and unsupervised machine learning. (backed by Talis and SLAUGHTER AND MAY)
- Accuminor: Financial crime and threat risk assessments on autopilot. (backed by Edastra and Zenith Venture Capital)
3. Automated Dispute Resolution: Mediations and resolutions don’t always require a human touch. Platforms like eBay already employ AI to partially auto-resolve customer complaints, especially in B2C contexts like eCommerce. Payment disputes are a great application, where AI applications can effectively take over the entire process, producing evidence from internal data and resolving any disagreements.
- Chargeflow: chargeback recovery on autopilot used by ecommerce companies to automatically defend against payment claims (backed by OpenView).
In all these scenarios, the intersection of AI and law can lead to more efficient, streamlined, and accessible legal processes, which improve collaboration and drive down costs. The coming years will undoubtedly witness the evolution of Legal Tech, with AI at its core with the financial sector at the forefront of the shit.