In 2023, after three years of building a car lending startup, Fuse co-founders Andres Klaric and Marc Escapa realized that LLMs could modernize something even more important: the loan origination system (LOS), which is the backbone of the lending industry.
Frustrated by the limitations of legacy software, Klaric (pictured left), a Bolivian native, and Escapa (pictured right), a Spanish immigrant, turned to their business to build Fuse, an AI-native LOS.
On Monday, Fuse announced it had raised a $25 million series round led by Footwork, Primary Venture Partners, NextView Ventures and Commerce Ventures.
An LOS serves as the primary system of record for most lenders, managing the entire loan lifecycle: from initial application and underwriting to final approval and disbursement of credit. However, traditional systems can take up to a year to integrate and typically have multi-year, expensive contracts, Klaric said.
By leveraging artificial intelligence, Fuse claims its agents can help lenders process higher loan volumes, automate underwriting and significantly reduce operational costs.
The company, which already has more than 100 customers, wants to ease credit unions’ transition to Fuse by offering the first 50 eligible organizations free access to its platform until their current contracts with legacy LOS vendors expire. To support this, the startup has set aside $5 million for a program it calls a “rescue fund.”
Klaric insists it’s “not just a marketing ploy,” explaining that because legacy software costs are high, many credit unions can’t afford to break their current contracts to switch providers.
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Nikhil Basu Trivedi, co-founder and general partner of Footwork, told TechCrunch 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.
“We know credit unions are really hurting and want to adopt AI, but we have no idea how to do it,” he said.
Basu Trivedi compared LOS to an ERP or CRM, noting that they are just as vital to a credit union’s day-to-day operations. He said replacing one LOS with another has traditionally been very difficult. However, as with many AI ERP startups, the founders promise that Fuse can be adopted relatively quickly.
Some of the legacy LOS systems Fuse is trying to replace include the market-traded nCino and the privately held MeridianLink.
Of course, Fuse isn’t the only startup developing an AI-powered LOS. The company’s competitors include Casca and Glide.
Klaric says he believes strongly in the mission to help credit unions reduce costs in large part because these institutions serve America’s middle class.
“Credit unions and smaller financial institutions have what it takes to win. They have the local presence, the local focus, a great member experience. They even have branches in really good locations. The only thing they don’t really have is the right technology,” he said.
