LegalTech has officially become the investment trend of 2020
According to a report from Thomson Reuters, the LegalTech sector showed spectacular growth from just £2.5 million in 2016 to a whopping £62 million in the first 9 months of 2019.
The findings, which are published in the Legaltech Startup Report 2019, show that investment into UK LegalTech startups has jumped dramatically in recent years. It also reveals that the UK dominates the EU legal technology market, with UK startups accounting for almost half (44%) of all LegalTech startups in the EU.
Why the UK Leads the LegalTech Sector
The UK’s legal industry has been investing heavily in technology solutions since around 2014. That year, investment in the sector was recorded at just £1.5 million. Many of the big city law firms like Mishcon de Reya, Allen & Overy and Slaughter and May launched their own ‘in-house tech hubs’ which made up the majority of investment that year.
As time went by, LegalTech startup firms started to sprout up in the UK, many helped by direct investment from the British legal sector. The key to Britain’s success in LegalTech is its expertise in artificial intelligence or AI.
AI is present in most aspects of our lives, which we can see in the eerily tailor-made advertising we find posted on our social media pages. In the legal sector, AI technology helps law firms take on many more cases and allows them to personalise and automate their services.
AI is the Name of the Game
This is important because of the huge rise in demand for legal services. Unless you’ve been living under a rock you will have heard of PPI compensation claims. Although the opportunity to make a claim ended on 29th August last year, there are now other areas coming under the microscope for mass compensation like mis-sold mortgages and pensions.
This means there are hundreds and thousands more Brits with the potential to make compensation claims in 2020. The only trouble with that is making sure small to medium size law firms are able to cope with their case volume when the claims start pouring in.
This is where artificial intelligence is really valuable. British LegalTech firms such as Lawthority are pioneers in the area of AI, designing systems that allow lawyers and solicitors to provide a truly personal service no matter how big their case load is. This effectively levels the playing field for small to medium law firms trying to compete with the legal giants.
Legal Technology Investments to Reach New Heights In 2020
Because demand for legal services is expected to increase rapidly to include claims for mis-sold financial products, 2020 will be a strong year for the sector. This is mainly because LegalTech enables smaller practices to provide a client experience that rivals the big players.
This is going to be vital in 2020, particularly as the Financial Ombudsman Service (FOS) now pays out compensation for payday loans as well as mis-sold mortgages, investments and pensions. For many years our TV screens have been alight with payday loan firms offering short-term loans at astronomical interest rates.
That’s now easing off after these firms came under scrutiny for mis-leading people into getting up to their necks in debt. Wonga, the firm with perhaps the most annoying ad on TV, went bust spectacularly towards the end of 2018, mainly because the firm was caught in the act of mis-selling.
All of this is a good sign for the legal profession because it ensures a constant pipeline of cases for the next year or so. Legal technology is going to be vital in allowing law firms to deal with increased demand for their services, without the need to hire more staff.
To find out more about exciting opportunities to invest in the UK LegalTech sector, contact us today.