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The Rise of Fintech: An Impact Analysis and Blockchain Case Study

I t’s safe to say that machine learning algorithms are no longer concept-based hypotheticals, they’re tangible tools for legal achievement. At the ACC Mid-Year Meeting Session titled, “The Rise of Fintech: An Impact Analysis and Blockchain Case Study,” a panel of legal experts decoded the latest in financial technologies (fintech) — from blockchain to artificial intelligence — and provided attendees with real-world strategies to help implement them.  

unspecified-2Here are some key takeaways:
  • A blockchain consists of multiple smart contracts integrated into a “block,” which is linked to other blocks in an immutable chain. One change causes a cascade of other changes across the chain.
  • Public blockchain technology does not work for the financial services industry. Financial services will not adopt it until it is more scalable and secure. For that reason, “shared ledger” technology is more feasible in the short term (e.g., a technology based on consensus, cryptographic audit trails, and network nodes).
  • Law firms can either innovate and stay ahead, or wait and fall behind their competitors.
Speaking at the event were a panel of fintech experts, including: Jason Mark Anderman, vice president and senior counsel, American Express; Ingrid Busson-Hall, senior director, financial regulation, PayPal; Isabelle Corbett, senior counsel and directory of regulatory affairs, R3; and Caragh Landry, global head, discovery services, Integreon.

Faced with the need to “do more with less,” in-house counsel are increasingly considering the use of AI and fintech to sort through discovery, automate contracts, and hasten audits. In fact, a sizeable number of law firms are being proactive and building their own labs. There, they code to develop innovative technologies to stay up to speed.

In the January/February ACC Docket feature article entitled “The Future of Contracts: Automation, Blockchain, and Smart Contracts,” author Dan Puterbaugh emphasizes the importance of staying ahead of the curve by adapting technologies like blockchain into daily legal practice. He asserts that it is up to the legal department to serve as a liaison for the company — informing the CEO about the risks and rewards of the potential technology.

“Your IT department is certainly aware of blockhain technology and your CEO is likely reading about smart contracts, but it is ultimately up to the legal department to decide whether to push the organization toward a pilot program. If a pilot program is launched, someone from the legal department will have to act as an information clearinghouse between the engineers, executives, and leaders in the legal department,” Puterbaugh notes.

Once implemented, a large indicator of success will rely on the ability of the legal department to oversee the automated technology. While blockchain and other forms of fintech have the potential to drastically streamline burdensome processes, they are still susceptible to hacking and computing error. Being able to find a balance between trust and control is crucial.

“You can double check the math behind modular encryption if you really, really have insomnia one night,” says Panelist Jason Mark Anderman.

Through the session, the panel engaged audience members with activities, including a brainstorming session on how to encrypt messages in the scenario of a corrupt postal system. One group proposed using WhatsApp to encrypt the message rather than a conventional, low-tech methodology.

In the coming years, the speakers noted that they expect machine learning and artificial intelligence to become increasingly pervasive for in-house counsel. Navigating the risks associated with these developments will be an important issue for companies wanting to remain on the forefront of efficiency. And as always, ACC will help you get there.


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