Computable Contracts in the Financial Services Industry

TL;DR

This paper advocates for the adoption of computable contracts in the financial industry, highlighting their potential to improve efficiency, reduce costs, and enhance decision-making through a formal contract language and use cases.

Contribution

It introduces a Contract Definition Language and discusses practical use cases demonstrating benefits for the financial services sector.

Findings

Enhanced customer experience through automation

Reduced legal transaction costs

Improved adaptability to legal changes

Abstract

A computable contract is a contract that a computer can read, understand and execute. The financial services industry makes extensive use of contracts, for example, mortgage agreements, derivatives contracts, arbitration agreements, etc. Most of these contracts exist as text documents, making it difficult to automatically query, execute and analyze them. In this vision paper, we argue that the use of computable contracts in the financial services industry will lead to substantial improvements in customer experience, reductions in the cost of doing legal transactions, make it easier to respond to changing laws, and provide a much better framework for making decisions impacted by contracts. Using a simple payment agreement, we illustrate a Contract Definition Language, sketch several use cases and discuss their benefits to the financial services industry.