How technology is bridging the financial inequality gap for the unbanked

Originally published on AnswersOn.

By Gina Jurva – Joseph Raczynski

The Covid-19 pandemic is exposing long-standing societal inequalities that range from access to healthcare to access to childcare and place our society is under a microscope. One of the biggest challenges is getting stimulus funds to those who need it most, especially in those cases where the individual may lack access to a bank account.

Thomson Reuters technologist and futurist Joe Raczynski explores how the pandemic may end up being the catalyst that eventually solves the financial inequality gap for the unbanked population.

What does it mean to be underbanked or unbanked?

Joe Raczynski: Often employed interchangeably, the Federal Deposit Insurance Corporation (FDIC) classifies those people that underutilize their bank as underbanked, while individuals without any form of bank account are considered unbanked.

Cash is no longer king, and the underbanked and unbanked have struggled during the pandemic as paper and metal currency, their primary medium of exchange, has been dropped out of circulation. The paper money has been shown to carry diseases, further exacerbating a financial disconnect for the unbanked.

The single most salient dilemma, of course, is that the unbanked have less of an opportunity to build a good credit history, and as a result have less of a chance for reasonable loans.

What are some reasons a person wouldn’t have a bank account?

Joe Raczynski: There are a multitude of explanations for not having a bank account. The most challenging from a socioeconomic perspective, are those people without the means to save money. Another highly cited reason is that people simply do not trust banks. Their concerns orbit around the possibility of a bank folding or their money simply disappearing. These concerns are typically more prevalent in people who have experienced such issues in other countries.

unbanked
Thomson Reuters technologist & futurist Joe Raczynski

Also, a smaller subset of individuals is actively avoiding a system that requires divulging personal information to open an account. These individuals may have more nefarious reasons to remain out of the system, however, and are in the minority.

This phenomenon shows up in certain ethnic communities. For example, African Americans have the nation’s highest rate of unbanked, at almost 17%, compared to other ethnicities. However, they have had a three-year decline in the number of unbanked households, according to the Federal Deposit Insurance Corporation (FDIC). About 14% Latinos are unbanked; and about 3% of whites, based on FDIC statistics.

What financial services do the unbanked use?

Joe Raczynski: While the unbanked are marginalized in a traditional financial capacity, alternative financial services and burgeoning technologies are enabling people to bypass this challenge. Some of these alternative financial services — such as check-cashing services or payday loans — often charge egregious fees and related costs that can be debilitating for an unbanked user. Other services — such as money transfers or the use of prepaid debit cards or gift cards — also pose their own costs and rates, but do offer users more options.

Finally, mobile apps like Square, Venmo, PayPal, and a host of others enable people to send money to others and buy goods and services directly, provided they have money in that app account.

If a person is unbanked, how could they receive Covid-19-related stimulus funds from the government?

Joe Raczynski: The initial phase of stimulus relief was strictly direct deposit for the banked and government checks for others. Recently, the prepaid debit card was used to assist the unbanked. This is the same mechanism that the Internal Revenue Service (IRS) uses for tax refunds; however, while these prepaid debit cards are helpful, they also pose significant risks.

Fraudsters have seized upon the anonymity of these cash-filled cards to steal from the government. In some cases, these criminals are filing up to 100 false personal income taxes via someone else’s social security number. These taxes are surreptitiously submitted with refund expectations, the refund is then loaded onto an untraceable prepaid debit card and sent to a ‘here today gone tomorrow’ P.O. box.


While the unbanked are marginalized in a traditional financial capacity, alternative financial services and burgeoning technologies are enabling people to bypass this challenge.


The rapid implementation of this form of tax fraud has outpaced many traditional fraud scams, and it is surmised that over the past decade, one-time drug traffickers now have opted into this scam instead.

What changes are taking place in the banking industry to appeal to the unbanked?

Joe Raczynski: The single most significant change is the recent proposal of the federal government to issue FedAccounts within the next several years. This possibility would mean that anyone with a mobile phone would have a digital wallet, and money could be transferred from the government to an individual in moments. A person could also use their FedAccount to send money to anyone else, or even to a business with ease.

While that alone is significant, this new digital wallet will likely enable greater use of cryptocurrency, control of personal identity, and the ability to store other property digitally via asset tokenization.

Outside of the government-sanctioned digital wallet and currencies are a pending wave of private companies issuing cryptocurrency that the unbanked could seek out and use as new forms of money. For those civil libertarians among the unbanked who wish to remain outside of future government-issued digital currency, they could rely on Bitcoin, Zcash, Monero coins, or any number of other cryptocurrencies. Some of these cryptocurrencies have at their base, Zero Knowledge Proofs (ZKP) that permit completely anonymous transactions without personal information. While this could help the libertarian unbanked, it creates some headaches for anti-money laundering professionals that will likely be chasing fraudsters in this area very soon.

What final tips can you share to help the underbanked or unbanked?

Joe Raczynski: While I still believe that opening an account at a trusted bank that has low to no fees is the best option, the hope of the FedAccounts is very promising for the unbanked. The idea that a simple digital wallet with digital dollars can allow you to bypass banks and credit card processers could be very appealing.

In a similar scenario, the door for Bitcoin and other cryptocurrencies continues to slowly open. A future fluidity of increased financial ease of exchange for the unbanked is coming into focus, and a host of new options and services are arriving now, which will enable the unbanked to be better positioned for financial inclusion.

2020 cloud update—acceleration to platform

Originally published on Legal Insights Europe.

By Joseph Raczynski

Cloud adoption has increased steadily over the last several years since we last forecast an Increasingly Cloudy outlook for law firms in 2017. The most recent industry data, ILTA’s 2019 Technology Survey finds that 72 percent of those surveyed across the law firm landscape will expand their use of Cloud based technologies in 2020. That is up from 62 percent in 2016. Based on my own observances, sentiment around the technology has clearly changed over the last decade from skepticism to general adoption.

ILTA Annual Technology Survey – 2019

The once thunderous clap of resistance has subsided, but according to the ILTA survey, a few subtle headwinds persist. The two areas of concern have grown for some law firms despite the overall uptick in adoption; cost and performance. The infrastructural easing for technology professionals moving to the Cloud and not having to maintain hardware and software, including the pesky but massively important patches, is an enormous benefit. The primary issue, the cost of converting that IT function to the Cloud has created some consternation, the survey finding cost concerns up to 50 percent from 37 percent four years ago. I will dive into the likely rationale for concern and the promise ahead in a moment. Performance anxiety is up slightly year over year, but still hovers around 30 performance historically. What has improved in overall sentiment is security and reliability. Both progressed as people understand the intrinsic positive benefit related to Cloud acceptance.

ILTA Annual Technology Survey – 2019

A deeper dive in the Cloud

The Cloud is a nebulous term. To fully understand what the ILTA survey captured, let’s dive a bit deeper into the technology. Most often people think of the Cloud as a place to store files. This is certainly true and is likely the dominate use case for most law firms. Having secure, universally accessible files in the office or remotely is imperative, now more than ever. The tools and services enabling files everywhere has proliferated, which may have exacerbated the concern surrounding cost. Based on my experience, multiple factors are at play. Increasingly, legal technology vendors are offering their version of their particular service ‘in the cloud’. If a firm has 30 products, all offering a Cloud solution, frequently add-on fees for additional storage can accumulate, generating trepidation in the Chief Information Officer.

One new solution to this cost dilemma is starting to emerge. The standard rule is to choose trusted, very well-established providers. In the Business of Law, operations space, Elite 3E would be an example. Storing information off-site can create agita on face value for anyone, but storing it with a lesser known, cheaper alternative, could prove risky. In addition, another baseline perspective states that it behooves a firm to mirror data with at least two different Cloud hosting companies for redundancy.

With that as a backdrop, the proposed emerging solution, still in its infancy, leverages a Legal Platform. Platforms have existed for ages and in many forms. Simply put, they create an ecosystem or environment that allow people and business to participate if they abide by rules, meet standards, and ultimately this confluence creates a network effect for the community. These platforms are new and developing in legal. In theory, law firm applications downloaded from a ‘Legal App Store’ would sit inside this platform and be able to use the same datastore. This could reduce the number of data Cloud providers and the implicit cost associated with them. The concept here is that a law firm would have a Platform where all practitioners and administrators would work. With Single Sign-on (SSO) each user would have access to all permitted applications and tools, as well as the underlining data. The ability to drive workflow and share data securely, all leveraging various components of Cloud technology would simplify and decrease overall Cloud cost.

Beyond merely storing files, several other areas of Cloud use will increase in the future. As more firms start to leverage Artificial Intelligence (AI) algorithms, the ability to use processing power hosted in the Cloud should proliferate. Instead of having massive computing power, as with a large numbers of expensive computers inside the organization, Infrastructure as a Service (IaaS) could be leveraged in the Cloud. What this means is that an IT professional could spin up and command access to X number of computers processing power capacity in seconds—meaning they could rent processors in the Cloud to crush large volumes of data (what AI does) very quickly and inexpensively.

The irony of IaaS and moving to the Cloud is that in-house or contractor-based System Integrators (SIs) are increasingly important. These are individuals who oversee the vast array of Cloud infrastructure that will only grow over time. Whilst an initial benefit of Cloud was fewer IT employees, the complexity of the web of Cloud connections is buoying specialty positions to support this new frontier.

The shift to Cloud technologies has happened. Law firms will increasingly adopt a more robust utilization of these services. With expanding integration across the Legal Platform, applications driven by interoperability will likely enable streamlining of some Cloud based datastores, increasing security, flexibility, scale, and hopefully making legal services easier to use.

Part 2: Legal Geek’s Uncertain Decade: Can ALSPs provide what their clients want & need?

Originally published on AnswersOn.

By Joseph Raczynski

General counsel (GCs) across the United States and the United Kingdom have varied approaches to the current market conditions, according to recent surveys. Interestingly, at the center of the debate is how alternative legal service providers (ALSPs) are utilized and perceived compared to traditional law firms.

Not surprisingly, many GCs felt that individual client needs ultimately superseded the ALSP v. law firm rift when looking at the legal landscape beyond the Covid-19 pandemic.

In the second of a four-part global webinar series, The Uncertain DecadeLegal Geek again brought Mark Cohen, CEO of Legal Mosaic, and Prof. Richard Susskind to dissect what clients want and need now and breakdown the hope and hype of ALSPs. (You can read about the first webinar here.)

The survey responses from GCs about how they’re managing their own in-house legal teams caused some eyebrow rising. While the “worry of people, cashflow, and uncertainty persist; the newness of remotely running the team, advising the business, and getting law firms responses, have been quite successful,” said Susskind.


Survey results saw general counsel in both the US and the UK in ominous accord — a majority on both sides of the Atlantic described the level of change from this current crisis as “significant or massive.”


In another revelation from the survey, UK GCs noted that ALSPs fell short of expectations during the crisis, which contrasted Cohen’s findings of GCs in the United States where law firms fared poorly and ALSPs flourished. The two panelist grappled to find just rationale for the variance, eventually settling on possible cultural differences. “Maybe the US is more pragmatical about the relationships,” Cohen suggested, adding that ALSPs in the UK can be subcontractors of law firms where in the US they are often more organic, outside of the Big Four.

Finally, the survey results left the GCs on both continents in ominous accord — a majority on both sides of the Atlantic described the level of change from this current crisis as “significant or massive.”

More for less

The idea of getting more quality legal service for less spend is a central theme repeated by Susskind and Cohen, underscoring their overarching thesis for the webinar: Legal operations are paramount. Cost cutting has become table stakes; and now it falls upon the chief operating officers (COOs), to devise new business models, direct and enable innovation, and reluctantly, ruminate about the next calamity. “Legal expertise used to be the primary focus,” Cohen explained. “Now business acumen and technological tools used by operations can help clients.”

Indeed, legal organizations have to reimagine the art of the possible and transform, he added. While the end goal is an elated client, there are far more fluid paths combining “less expensive people using better technology” to achieve that, said Cohen.

A polling of webinar attendees on desired topics of discussion, pivoted Susskind to deliberate on the impact of start-ups on the legal landscape. A few years ago, a few hundred emerged, now there are a few thousand legal technology businesses. Bluntly, he stated that most of these companies will not last as each try to be the next Amazon.

What did surprise him, was the primary focus for these embryonic upstarts, as the majority of these companies endeavor to solve law firm back office functions, Susskind said, adding that the amount of effort focused on helping the client is actually pretty low.

Legal Geek

Cohen agreed, saying much can be done in this space to focus on helping those in need of legal services. “There is far too much law for those who can afford it, and far too little for those who can’t.”

Both panelists spent a significant amount of time on the question of whether most ALSPs were more hype or hope. For example, Cohen sees the outgrowth of ALSPs as a byproduct of unmet market need. Since the 2008 crisis, ALSPs have led with a different DNA. More business than law firm, they breathe process design, project management, and technology to help their clients. This corporate model, which has “come of age” in the last few years, is providing legal services which are better, faster, cheaper, and more customer-centric, explained Cohen.

Project managers utilize data-centric analysis, to oversee risk management; and what was once thought of as a junior varsity, ALSPs should no longer be seen this way. In fact, based on Net Promoter Scores, these organizations can often prove their value empirically in serving their customer. UnitedLex and Axiom, for example, are poster children for this data-centric service model. Highly competitive, Axiom only engages with one out of every 20 lawyer applicants it receives, and practices law in more than 90 countries, though not in the US. Both companies leverage their corporate structures, allowing flexibility and reinvestment while dismissing the partnership model of law firms, said Susskind.

As they concluded their discussions, both Cohen and Susskind surmised that the focus will always be on the client of course, but how those clients are serviced has changed. Cohen reminisced that once “lawyers had to practice or leave,” but now they need to meld many different components together, such as technology, operations, and analytics.

Susskind ended with his impassioned beliefs on mindset shifts, suggesting that lawyers have to be open to new things, be entrepreneurs, musicians, and artisans. They should not assume that everything will look like it looks today.

Tomorrow’s lawyers must try to avoid their traditional mindset trap — that “the best is the enemy of the good,” said Susskind, adding that perfection at the cost of agility and creativity is no longer sustainable.

Podcast: The Hearing – Gail Gove – General Counsel – Reuters

I spoke with Gail Gove, General Counsel at Reuters who takes us behind the scenes of the case that grabbed the world’s attention in 2018: the incredible story of Reuters journalists, Wa Lone and Kyaw Soe Oo, who were imprisoned in Myanmar while investigating reports of mass murder. Gail and I talk about the all-encompassing nature of the work and what it’s like to work with one of the most famous lawyers in the world, Amal Clooney.

Starting out as a civil rights lawyer, Gail speaks of the importance of looking at legal issues through a wide-angled, global lens, the minefield of media laws around the world and the importance of having robust journalism.

Listen on Apple: https://podcasts.apple.com/zm/podcast/ep-53-gail-gove-reuters/id1389813956?i=1000476412447

Listen on Google: https://podcasts.google.com/feed/aHR0cHM6Ly9wb3J0YWwtYXBpLnRoaXNpc2Rpc3RvcnRlZC5jb20veG1sL3RoZS1oZWFyaW5n/episode/aHR0cDovL2F1ZGlvLnRoaXNpc2Rpc3RvcnRlZC5jb20vcmVwb3NpdG9yeS9hdWRpby9lcGlzb2Rlcy9FcDUzX0dhaWxfR292ZV9taXhkb3duLTE1OTA3NDkwMzM5ODcyOTc3MTAtTXpBME9EQXRNemMwTXpVNE1qaz0ubXAz?ved=0CAcQ38oDahcKEwj41-eKoObpAhUAAAAAHQAAAAAQAQ

Part 1: Legal Geek’s Uncertain Decade: Debating the future of the legal industry

Originally published in AnswersOn.

By Joseph Raczynski

It’s the questions on the mind of every legal professional: What will legal life look like after the COVID-19 pandemic passes? What will this “new normal” actually be? And more specifically, if courts close and clients are shuttered, what will half the world’s lawyers do?

In the first of a three-part global webinar series, The Uncertain DecadeLegal Geek sought to shed some light on these questions, bringing together two of the most respected names in the legal industry — Mark Cohen, CEO of Legal Mosaic, and Prof. Richard Susskind — to delve into how law firms, courts, and the general population are facing unprecedented legal challenges in the current crisis environment.

Cohen began with a historical perspective about the COVID-19 crisis, citing four previous transformative events after which the legal community bounced back, with one exception. The global financial crisis that began in 2008 permanently altered the way law firms function and interact with clients.

Such transformative events force law firms to reconsider the traditional model of work, birthing a “new era of legal operations,” said Cohen. Historically, what stood out is what failed to change, he explained, adding that law schools and the courts returned to normal, greatly unaffected by the financial crisis.

Why is now different?

Now, however, the reckoning has arrived. In a matter of weeks, law schools converted to online education, something they had resisted for more than a decade. Courts too, have begun to adjust adapting latent technology that had emerged from “other industry use” to their new reality. “It simply needed to be turned on,” said Cohen, adding that ultimately, these older components — physical classrooms, some in-person courts, and in-person client meetings, are no longer necessary.

talent
Mark Cohen, CEO of Legal Mosaic

It is “a bright light being shined on how we can do things differently in legal,” he said.

When asked how much of the physical nature of the practice of law do we really need now, Cohen pointed out that the entire legal workforce became a remote workforce almost overnight and in general, it seems to be working.

What is the impact to industry components?

The bellwether for change is the general counsel, Cohen continued, adding that GCs have already been doing more with less for a time now — truly being “proactive enterprise defenders.” Now, all legal service providers and vendors need to look toward the GC and senior legal teams because they are “living law’s future.”

Cohen then broke down the industry components into four main areas:

Consumers — Individuals in need of legal counsel are driving change. There is increased access to information and platforms where data is available, and that’s driving process. People will now make decisions based on competency, metrics, and expertise as data accessibility is universal and process is increasingly coveted.

Academia — The universities will need to rethink their curricula. Education is a lifelong pursuit, and newer programs will need to incorporate many disciplines beyond the classics, including marketing, technology, and business.

Legal Service Providers — Cohen said for legal providers, the main theme is an emphasis on customer-centric models, more than ever before. While new solutions will be data-driven, it is about vendors learning and understanding more deeply about the customer and thereby driving more value to them.

Courts — In the short term, “courts have been crippled,” said Cohen. He then brought up a concept using the Chinese word for crisis — Wéijī, explaining that crisis has two meanings in Chinese, “danger” and “opportunity”. The courts and associated lawyers find themselves in Wéijī at the moment. The courts now are paralyzed, of course, but they could seize the opportunity and transform the entire industry with intelligent adoption of technology and process.

On the state of the market

For his part, Prof. Susskind views the current legal market conditions in several phases. Initially, the legal industry had to mobilize to enable work to be produced. Currently, he sees this lockdown phase as a test which provides an inordinate amount of valuable data. In his grander vision, we have an impromptu Proof of Concept at hand, Susskind observed. “We should be capturing as much data as possible and seeing which innovations could work going forward” during this lockdown, he explained. Eventually the third phase, emergence will come; however, this will be complicated by a bifurcated marketplace of individuals empowered to return to the office and those forbidden from doing so. Fundamentally, legal work be done differently going forward, and face-to-face interactions may no longer dominate, Susskind said.

While most managers in the legal sphere are focused on the here-and-now, Susskind argued that people “need to be looking at the long term and asking themselves to what extend have things really changed?”

susskind
Prof. Richard Susskind

For example, Susskind noted the absence of recent artificial intelligence chatter and believes that the urgency of AI might will die down for the next 18 months. Since AI is less tangible for most day-to-day operations, it makes sense that it could fade as a focus for law firms and the courts.

Indeed, all the current attention in the legal industry surrounds basic technology that enables job function. While the future of people working from home with basic technology has arrived, it is built on a “house of cards” and “stuck together with bubblegum,” stated Susskind. The legal industry will endeavor for practical secure and permanent work from home (WFH) solutions; and therefore, the more nebulous, dreamier innovations that might on day again push the limits of the law and technology are on hold for now.

The call for remote courts

What was thought to have been a 10-year plan to move the world’s antiquated court system to a remote one actually only took a few weeks, said Susskind. Now, he said his preoccupying thought remains: Is a court is a service or a place? And if the latter, do we really need that place?

To that end, courts around the world have morphed into three possible types: Audio, where some of the events are either entirely or partially access by telephone; Video, which mirrors audio in its use; and lastly, Paper, which still requires submissions to the court be in written form and the judges respond in kind.

The early evidence of these new court systems are very positive. To the surprise and skepticism of many, “it seems to be generally working,” said Susskind, adding that people were distrustful of this shift, as we have seen little change on this front in more than 150 years.

Rapid transformation is upon us, Cohen and Susskind agreed. In a matter of weeks, the legal industry experienced more change than it had in previous decades. The light is bright on how things can be done in legal, but much more data needs to be digested to see the resulting outlines of the industry’s still murky future.