‘Gainshare’ clauses can incentivise AI-related savings in financial services, say experts

A new report published by Pinsent Masons, which explores the implications for financial services firms of suppliers’ use of AI tools to deliver critical services, highlighted the opportunity of using pricing mechanisms to account for future, gains, cost-savings and re-investment in optimising service delivery. The report said that traditional services contracts were not designed for this.

According to Luke Scanlon of Pinsent Masons, AI use in service delivery is prompting discussions about a shift towards more outcome-based pricing in financial services contracts. One such charging mechanism is ‘gainshare’, where customers and suppliers agree to share financial benefits achieved through certain improvements, innovations, or efficiencies delivered by the supplier.

“Gainshare is often used where the customer wants continuous improvement rather than static service delivery; the supplier has levers to drive change – such as automation, AI, process re-engineering, or cloud optimisation, for example – or where the opportunity for improvement is significant but uncertain at contract signature,” Scanlon said.

“However, the approach is not without challenges. Suppliers may be reluctant to agree to gainshare where it limits their ability to retain efficiency gains as margin, while customers may prefer more certain, upfront pricing reductions. As a result, gainshare structures often need to be carefully calibrated to balance risk and reward on both sides”, he added.

“Key considerations when negotiating gainshare provisions include: the need to be clear about the baseline position that you are working from; how the ‘gain’ will be calculated and how it will be shared; and how it will be verified. Customers also need to be clear about any dependencies which apply to the gainshare,” he said.

Yvonne Dunn of Pinsent Masons said that, in the context of financial services supplier contracts, gainshare is increasingly being discussed in relation to AI use in service arrangements.

“Tools such as AI-driven triage in business process outsourcing or AI-assisted coding in application development can reduce run-rate costs or the need for rework,” Dunn said. “Gainshare enables the supplier and customer to share in the benefits derived from those improvements and addresses the risk that AI benefits may not be certain. Accordingly, rather than locking in benefits it allows value to be shared once it materialises.”

Scanlon said that when drafting AI-related gainshare provisions, thought needs to be given to undertaking some benchmarking, to establish agreed norms relating to service delivery, as well as to whether, and if so how, the parties will be able to measure any ‘gain’ that AI use delivers relative to any business-as-usual process improvement that might materialise.

“The baseline may need to be more dynamic, for example due to data variability or changes in model accuracy over time, so parties should agree on how baseline adjustments will be handled,” he said.

“The quality of data an AI tool operates on can also impact the gain, so responsibilities

around this will need to be covered in the contract to avoid disputes,” he added.

Access the Pinsent Masons report on AI-enabled service delivery