After three years of developing an automotive lending startup, co-founders Andres Klaric and Marc Escapa recognized in 2023 that Large Language Models (LLMs) could dramatically improve the loan origination system (LOS), a critical component of the lending sector.
Frustrated by the shortcomings of existing software, Klaric (pictured left), originally from Bolivia, and Escapa (pictured right), an immigrant from Spain, reoriented their company to establish Fuse, an AI-powered LOS.
On Monday, Fuse announced the successful completion of a $25 million Series A funding round, spearheaded by Footwork, Primary Venture Partners, NextView Ventures, and Commerce Ventures.
An LOS functions as the core record-keeping system for most lenders, overseeing the entire loan process from initial application and underwriting to final approval and fund distribution. However, traditional systems can take up to a year to implement and typically involve multi-year, costly contracts, as highlighted by Klaric.
By harnessing AI, Fuse asserts that its agents can assist lenders in handling increased loan volumes, automating the underwriting process, and substantially reducing operational expenses.
Fuse, which already serves over 100 clients, aims to facilitate credit unions’ transition to its platform by offering the first 50 eligible institutions complimentary access until their existing contracts with legacy LOS vendors expire. To support this initiative, the startup has allocated $5 million for a program it terms a ‘rescue fund.’
Klaric emphasizes that this is “not merely a marketing tactic,” explaining that due to the high costs associated with legacy software, many credit unions are unable to terminate their current contracts to switch providers.
Nikhil Basu Trivedi, co-founder and general partner at Footwork, informed TechCrunch that his firm invested in Fuse because the United States has more than 4,000 credit unions whose technology is significantly outdated and in need of modernization.
“We understand that credit unions are struggling and eager to adopt AI, but they lack clarity on how to proceed,” he stated.
Basu Trivedi drew a parallel between the LOS and an ERP or CRM, asserting its comparable importance to a credit union’s daily operations. He mentioned that replacing an LOS has historically been quite challenging. Nevertheless, much like many AI ERP-focused startups, the founders promise that Fuse can be integrated relatively swiftly.
Among the legacy LOS providers that Fuse aims to replace are publicly traded nCino and private-equity-owned MeridianLink.
Naturally, Fuse is not the sole startup developing an AI-enhanced LOS. The company faces competition from firms like Casca and Glide.
Klaric expresses strong conviction in the mission of assisting credit unions in cost reduction, largely because these institutions serve the American middle class.
“Credit unions and smaller financial institutions possess all the necessary elements for success. They have a local presence, a community focus, excellent member experiences, and even well-located branches. Their primary deficiency, however, is access to the appropriate technology,” he commented.