Welcome to the era of automation – where the legal industry finds itself at a crossroads between innovation and tradition. Embracing technology in the legal sector is no longer a choice; it’s a necessity for firms to stay competitive and meet the ever-growing demands of their clients.
However, as we embark on this transformation, it’s essential to strike a balance between ambitious digital advancements and realistic adoption strategies. After all, progress is being made.
Data from HBR Consulting shows that 60% of law departments had implemented a legal data analytics tool in 2022 – up 52% on the previous year – while over a quarter indicated that they were using AI for at least a single use case.
As more tools come to market, one of the biggest threats facing the legal sector is ‘transformation fatigue’. To combat this, law firms must adopt a clear focus in the years ahead – prioritising targeted innovation rather than trying to ‘boil the ocean’ with new technologies.
The Current State of Legal Technology
The legal profession, often seen as conservative, has been gradually warming up to the idea of automation and technology.
While some pioneering firms have been quick to embrace automation tools, others remain cautious about disrupting their established workflows. As we navigate this landscape, it’s clear that certain areas of legal services are ripe for innovation.
One area is contract management. The process of drafting, reviewing, and managing contracts has traditionally been time-consuming and prone to human errors. Automation can alleviate these pain points by streamlining the entire lifecycle of contracts, from creation to renewal, thereby enhancing efficiency and reducing risks.
Another promising domain is legal research. Thanks to advancements in natural language processing and machine learning, legal professionals can now leverage AI-powered research tools that analyse vast volumes of legal data to provide accurate insights and case precedents swiftly.
But, while progress is undoubtedly being made, the legal sector still lags other sectors when it comes to innovation.
Automation Before Innovation
This isn’t always down to a resistance to change. Often, it’s a result of firms spreading their resources too thinly across numerous technology initiatives.
Attempting to tackle everything at once can result in ‘transformation fatigue’, where the benefits of individual innovations get diluted – leading to frustration and slower progress.
Before legal firms embark on digital transformation projects, a critical first step is introspection. Recognising and acknowledging areas where legacy processes and manual tasks still hold sway is paramount to optimising the impact of automation.
For many firms, archaic practices continue to consume valuable time and resources, diverting attention from higher value, billable tasks. One often-overlooked area is payments.
Legal firms play a critical role in complex transactions, from M&A and real estate deals to litigation payments and class action payouts. The associated admin and processes represent a drain of firms’ time and resources. Spanning everything from collating stakeholder payment details and verifying payee identity to ensuring compliance with Know Your Customer (KYC) and Anti Money Laundering (AML) regulation, this adds unnecessary stress for lawyers – who would rather dedicate their time and expertise to their clients’ legal needs.
The repercussions of such time-consuming financial processes reverberate throughout the entire organisation. Administrative burden weighs heavily on the team, affecting productivity and ultimately, the bottom line. At the same time, firms are exposed to significant financial risk which can make handling client funds a costly endeavour. Not only are they penalised with fines if found to be in breach of stringent client account rules but firms are also subject to hefty premiums for Professional Indemnity (PI) insurance.
Taking the Pain Out of Legal Payments
In short, manual payment processes are more than just an inconvenience for modern law firms. They can damage relationships with clients – who have come to expect a fast, painless and automated payout experience in a digital world – and impede revenue generation by tying up top talent in an endless cycle of paperwork and (unbillable) admin.
So how can firms take the pain out of legal payments?
Fortunately, new payment technologies have emerged as a formidable ally. Third-party managed accounts (TPMAs) – i.e. outsourced client account functions – offer secure and instant transactions, while prioritising transparency and automation.
TPMAs operate as an escrow payment service in which the third-party – a licensed external payments partner – receives and disburses funds on behalf of a firm and their client(s).
With advanced encryption ensuring data security, TPMAs mean legal professionals and their clients can engage in financial transactions with peace of mind – while law firms benefit from improved operational efficiency.
And the advantages don’t stop there. Enhanced transparency builds a sense of confidence and trust, while the elimination of manual data entry and repetitive tasks allows legal professionals to devote more time to legal services and fostering stronger relationships with their clients.
Embracing a Future-Ready Legal Landscape
As the legal sector embraces automation, it must do so with purpose and focus. The temptation to tackle the next, shiny new technology is an ever-present danger for firms, as they seek to unshackle themselves from legacy processes and ways of working.
But the path to success lies in identifying specific areas where technology can augment human capabilities. By recognising the potential of automation in areas like contract management, legal research, and complex legal payments, firms can unlock undiscovered efficiencies.
There’s no doubt that technology will help write the future of legal services. But, if firms want to secure successful outcomes from digital transformation, it’s vital they focus their efforts and invest in tools that pave the way for a simpler, more efficient and, crucially, more profitable future.
Ed Boal
Head of Legal
Shieldpay
