In 2023, after three years of building an automotive lending startup, co-founders Andres Klaric and Marc Escapa realized that large language models could modernize something even more significant: the loan origination system, which is the backbone of the lending industry. Frustrated by the limitations of legacy software, Klaric, a Bolivian native, and Escapa, a Spanish immigrant, pivoted their business to build Fuse, an AI-native loan origination system.
On Monday, Fuse announced that it has raised a 25 million dollar Series A round led by Footwork, Primary Venture Partners, NextView Ventures, and Commerce Ventures.
A loan origination system serves as the primary system of record for most lenders, managing the entire loan lifecycle from initial application and underwriting to final approval and credit disbursement. However, traditional systems can take as long as a year to integrate and typically have multi-year, expensive contracts, Klaric said.
By leveraging AI, Fuse claims its agents can help lenders process higher loan volumes, automate underwriting, and significantly reduce operational costs. Fuse, which already has over 100 customers, wants to ease the transition for credit unions by offering the first 50 qualifying institutions free access to its platform until their current contracts with legacy vendors expire. To support this, the startup has allocated 5 million dollars for a program it is calling a rescue fund.
Klaric insists that it is not just a marketing gimmick, explaining that because legacy software costs are high, many credit unions cannot afford to break their current contracts to switch providers.
Nikhil Basu Trivedi, a co-founder and general partner at Footwork, said that he backed Fuse because there are over 4,000 credit unions in the United States, and their technology is long overdue for an overhaul. He stated that credit unions are really hurting and want to adopt AI, but have no idea how to do it.
Basu Trivedi compared the loan origination system to an ERP or CRM, noting that it is just as vital to a credit union’s day-to-day operations. He said that swapping out one system for another has traditionally been very difficult. However, as is the case with many AI-focused startups, the founders promise that Fuse can be adopted relatively quickly.
Some of the legacy systems that Fuse is trying to displace include publicly traded nCino and private-equity-owned MeridianLink. Naturally, Fuse is not the only startup developing an AI-infused loan origination system. The company’s competitors include Casca and Glide.
Klaric says he strongly believes in the mission of helping credit unions reduce costs, in large part because these institutions serve the American middle class. He stated that credit unions and smaller financial institutions have everything required to win, including local presence, local focus, great member experience, and branches in good locations. The only thing they really lack, he said, is the right technology.