By Richard Mabey, CEO and co-founder of Juro
Fintech accounts for half of the country’s billion-dollar ‘unicorn’ startups, and are having to find innovative ways to create competitive advantage in a saturated market. Part of this revolution will be the shift to smarter and faster contract automation.
Last year, UK fintechs raised £7.65bn in equity funding, just over a third of their collective historical raise; the sector is undergoing massive and steady expansion, and would-be leaders will embrace technology that smoothens processes.
So far, pioneers have adopted limited use of Artificial Intelligence and Machine Learning to automate a number of time-consuming processes, allowing staff to focus on building relationships with clients and engaging more in strategic thinking. AI is now widely used across the financial sector to analyse risk and detect fraud, while the subset of machine learning helps build buyer personas and improve customer relationship management.
Smart contracts and contract automation will be the first step as financial institutions embrace digital transformation; over the last two years, pen-and-paper processes have been rapidly moved online and businesses are looking for ways to simplify digital bureaucracy. Fintech is ahead of the game on the adoption of blockchain, and as a result has already made some progress with digital contracts that can automate and secure agreements.
Smart contracts will allow parties to make deals online and to be able to trust that a digital ledger exists to secure all records of transactions and signatures. The details of parties can be stored on the blockchain safely and securely, used automatically to update the record once set conditions are met. This allows contracts to be continually updated without the need to drag in manual resources.
This is all good news. Smoother processes mean time and money saved. But scaling fintechs will struggle to keep momentum so long as they are bogged down by contract agreements. Secure contracts will encourage better deals, but finance professionals still need to get to grips with the software contracts are written on.
The companies that outgrow their ponds will be those who adopt smart solutions for these problems; as it stands, 68% of in-house lawyers still agree contracts in Word, and only 35% are using Google Docs. The former has parties send different versions back and forth over lengthy email chains; the latter can undermine the process of negotiation where changes are visible for all to see in real time.
Next to Blockchain technology and AI, word processing sounds quite commonplace. But the leaders able to fend off the competition on the way up will be those who can unshackle themselves from the inefficiencies of our most fundamental processes; those merging and acquiring, lending and borrowing large amounts of money on their rise to the top, should consider how technology can improve those steps.
At an average rate of £85,000 per year in London, the in-house lawyer is a much stronger asset when tiresome administrative processes can be automated. The technology gap provides a barrier to simple and effective work, spiralling fees and detracting from time spent with clients, and so on. Automated document generation alone would cut the time spent by lawyers creating these files by as much as 80% – which is significant when 600 hours per year are devoted to these admin tasks, on average.
Fintech transformed the financial sector and automation has the potential to transform fintech. This is particularly the case with API automation which integrates API product creation and consumption and minimises human intervention for a low-code approach to API lifecycle tasks, accelerating development and time-to-market. According to Gartner, organisations that can combine automation with operational processes, such as API management, can reduce operational costs by 30%.
The technology that moved us online has come on leaps and bounds in the last few years, but digitisation creates its own problems of manual inefficiency. In the medium term, we can expect AI and machine learning to help the transition towards seamless contract agreement. But it will be digital transformation that takes the businesses of today forward, whatever their budget. Once again, it will be programmers and software engineers who allow us to take the next great age of efficiency.
