In 2023, after three years of building an automotive lending startup, co-founders Andres Klaric and Marc Escapa realized that LLMs could modernize something even more significant: 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 righ), a Spanish immigrant, pivoted their business to build Fuse, an AI-native LOS.

On Monday, Fuse announced that it has raised a $25 million Series A 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 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 to Fuse for credit unions by offering the first 50 qualifying institutions free access to its platform until their current contracts with legacy LOS vendors expire. To support this, the startup has allocated $5 million for a program it’s calling a ‘rescue fund.

Klaric insists that “it’s 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, 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 the credit unions are really hurting and want to adopt AI, but have no idea how to do it,” he said.

Basu Trivedi compared the LOS 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 an LOS for another one has traditionally been very difficult. However, as is the case with many AI ERP-type startups, the founders promise that Fuse can be adopted relatively quickly.

Some of the legacy LOS 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 LOS. 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.

“Credit unions and smaller financial institutions have everything required to win. They have the local presence, the local focus, great member experience. They even have branches in very good locations. The only thing is they don’t they really have is the right technology,” he said.

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