Fuse raises $25 million to disrupt antiquated loan origination systems used by U.S. credit unions

In 2023, after three years of building an auto lending startup, Fuse co-founders Andres Klaric and Mark Escapa realized that LLM companies 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, Claric (pictured left), a Bolivian native, and Escapa (pictured right), a Spanish immigrant, shifted their business to building Fuse, an artificial intelligence-based LOS system.

Fuse announced Monday that it has raised a $25 million Series A led by Footwork, Primary Venture Partners, NextView Ventures and Commerce Ventures.

LOS serves as the primary scoring system for most lenders, managing the entire loan lifecycle: from initial application and underwriting to final approval and credit disbursement. However, traditional systems can take up to a year to integrate, and typically have expensive multi-year contracts, Klarik said.

By leveraging AI, Fuse claims its agents can help lenders process larger loan sizes, automate underwriting, and significantly reduce operating costs.

The company, which already has more than 100 customers, wants to make it easier for credit unions to transition to Fuse by giving the first 50 eligible institutions free access to its platform until their existing contracts with legacy LOS vendors expire. To support this, the startup has allocated $5 million to a program it calls a “rescue fund.”

“It’s not just a marketing gimmick,” Clark insists, explaining that due to the high costs of legacy software, many credit unions cannot afford to break their existing contracts to switch providers.

Nikhil Basu Trivedi, co-founder and general partner at Footwork, told TechCrunch that he supports Fuse because there are more than 4,000 credit unions in the U.S., 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 enterprise resource planning (ERP) or customer relationship management (CRM) system, noting that it is just as important to a credit union’s day-to-day operations. Replacing one LOS with another has traditionally been very difficult, he said. However, as with many AI ERP startups, the founders promise that Fuse can be adopted relatively quickly.

Some of the legacy LOS systems that Fuse is trying to replace include publicly traded nCino and private equity firm MeridianLink.

Of course, Fuse is not the only startup developing an AI-powered LOS system. The company’s competitors include Casca and Glide.

Clark says he believes strongly in the mission of helping credit unions reduce costs largely because these institutions serve middle-class Americans.

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