A technological transformation of secured transactions law: Visibility, monitoring, and enforcement

Modern economies are highly dependent on the existence and the proper operation of the credit market. Nevertheless, the credit market has failures. Then, a sound, predictable, and credible secured transaction system is an effective stimulus for credit, as it mitigates risks and alleviates such market malfunctions. Despite the notable success in the formulation of more and more effective legal solutions, in practice, the secured transactions legal system is imperfect as well. These imperfections debilitate the impact of legal strategies on the real market, undermine the capacity to repair market failures, and weaken the efficacy of legal solutions. The Paper identifies limitations of the secured transactions system in three critical areas: publicity is modest, monitoring is costly, and enforcement is limited. The aim of this Paper is, firstly, to study how the incorporation of the most recent digital technology developments to the different stages of secured transactions could mitigate such imperfections of the system and enhance its effectiveness; and, secondly, to single out some legal implications a systematic, pervasive, and extensive application of technology could entail. To that end, some digital technology developments have been selected (Artificial-Intelligence (AI)-based solutions, Internet-of-Things (IoT) schemes, smart contracts, electronic platforms) to be applied solely or combined, to the three imperfect components of any secured transactions system to observe how the effectiveness of the system is enhanced accordingly, and to anticipate which implications such an incorporation into the system might imply. It is concluded that the implementation of technological solutions to perform legal functions and repair imperfections and failures of the legal system foresee a panorama of incredible opportunities, but also arouse a number of legal concerns that should be anticipated and confronted in a timely manner.