Wall Street Starts Using AI to Cut Legal Fees: Saving hours is not enough, quotes must also drop

Dynamic Beating AI Newsflash: Goldman Sachs, Morgan Stanley, and Citigroup are now starting to require large U.S. law firms to factor in the efficiency gains from AI directly into their quotes.

When billed hourly, AI compresses 10 hours of work into 4 hours, naturally reducing the bill. However, banks are now pushing for further discounts: calculating upfront how much AI can save in costs, and then asking law firms to bid with a lower total price.

Citigroup has already requested law firms to bid on projects, specifying the AI-assisted savings. Morgan Stanley plans to have most external legal work done through competitive bidding and increasingly use fixed prices by the end of the year. Goldman Sachs is also pressing law firms to quantify the efficiency gains from AI.

This directly challenges the business model of large law firms that have long relied on the "hourly rate × hours worked" model. Research, contract review, and litigation document retrieval can all be accelerated by AI, yet the hourly rates at top U.S. law firms continue to rise. Wall Street now aims to deduct the money saved by AI directly from legal fees.