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University of Oxford/SRA report finds lack of financial capital the biggest barrier to investment in legal tech

A major independent study into innovation in the legal sector has revealed that while the majority of law firms are making increasing use of day-to-day technology, a lack of financial capital is still regarded as the biggest barrier to investment in technology. Of law firms’ future plans for technology, it is interesting to note that online portals for matter status updates features highest.

The research was carried out by the University of Oxford on behalf of the Solicitors Regulation Authority (SRA) to provide a ‘state of the market’ overview of the use of technology and innovation in the legal services sector from the perspective of legal services providers including law firms.

The study pays specific attention to areas where the SRA can make a difference and draws implications for the wider legal services market. One of the SRA’s 2020‑23 strategic priorities is to ‘actively support the adoption of legal technology and other innovation that helps to meet the needs of the public, business community, regulated entities and the economy.’

The key objectives of the research, carried out by a team led by Professor Mari Sako at the University of Oxford, are:

• to provide up-to-date evidence on how legal technology and innovation are being implemented, and the resulting benefits and risks for the users of legal services;

• to build a better understanding of unmet legal needs by highlighting perspectives of providers to help to address these needs; and

• to identify the size and shape of the legal technology and innovation ecosystem in the UK, so that the SRA can appropriately support innovative approaches to providing legal services.

The research team carried out an online survey of nearly 900 SRA-regulated firms, 50 interviews with various stakeholders, and analysis of databases (Burning Glass, Legal Technology Hub and Crunchbase).

The Final Report consists of five chapters aside from the introduction. The first looks at the findings on an online survey of SRA-authorised firms re innovation, the current and future uses off legal technology, and the barriers faced by innovators and adopters of legal technology.

In the past 12 months, over half (55%) of survey respondents said they had improved or increased their use of technology and 48% said they have made changes to the way they deliver their services. 51% of respondents said they have increased their use of technology to ‘manage or process work’.

Interestingly, future plans for using legal technology (as compared to current use) include:

  • Online portals for matter status updates;
  • Interactive websites to general legal documents;
  • Chatbots or virtual assistants.

However, respondents cite significant barriers to adopting legal tech, first and foremost of which is lack of capital. Among those adopting or planning to adopt legal technology, the barriers to adopting legal tech are said to be:

  • A lack of financial capital to invest in technology;
  • A lack of staff expertise to assess and implement technology;
  • Regulatory uncertainty.

Among those not adopting or planning to adopt legal technology the biggest barrier was also lack of financial capital. The top three reasons for not ‘innovating’ were:

  • Uncertainty over expected business benefits;
  • Not a strategic priority;
  • It ‘isn’t needed at my firm.’

Further chapters examine market segmentation in the legal sector; unmet legal needs and risks: provider perspectives; lawtech ecosystems: funding, scaleup and policies; and implications for policy and regulation.

You can access the report in full here: https://www.sra.org.uk/sra/how-we-work/reports/technology-innovation-in-legal-services/

Anna Bradley, chair of the SRA, said: ‘Supporting innovation and the adoption of legal technology is a key priority, as we set out in our corporate strategy. It can help increase access to justice for the public and small businesses, as well as supporting firms to be more efficient, benefitting everyone and the economy as a whole.

‘These findings drive home the fact that when we talk about technology, we need to remember just how broad that term is and hw far there is for some to travel. This is not just about artificial intelligence, virtual reality or future technologies. Some of the innovation which has the greatest potential to improve access to justice at pace is already available. Such technology can be applied widely and be used on a day-to-day basis to benefit both consumers and law firms. The challenge now is how we all work together to enable this to happen.’

Mari Sako, professor of management Studies at the University of Oxford and project leader for this research, added: “Technology and innovation have already changed, and will continue to change, the face of the legal services sector. Our research provides robust evidence of this.

“But we also found that benefits from legal technology are not evenly distributed across different market segments. Regulators, including the SRA, collaborating with other stakeholders could play a major role, not only to lower regulatory uncertainty but also to level the playing field across the market segments.”

Caroline.hill@legalitlexicon.com