Fuse secures $25M to modernise outdated loan origination systems for US credit unions

In 2023, after spending three years developing an automotive lending startup, Fuse co-founders Andres Klaric and Marc Escapa recognised that large language models could be applied to a far more impactful area: the loan origination system (LOS), a core component of the lending industry.

Frustrated by the constraints of outdated software, Klaric, who is originally from Bolivia, and Escapa, a Spanish immigrant, shifted their focus and launched Fuse as an AI-native LOS platform.

On Monday, the company announced it had secured $25 million in Series A funding. The round was led by Footwork, with participation from Primary Venture Partners, NextView Ventures, and Commerce Ventures.

An LOS functions as the central system of record for lenders, overseeing the entire loan lifecycle — from the initial application and underwriting process to final approval and fund disbursement. However, traditional LOS platforms can take up to a year to implement and often involve costly, multi-year contracts, according to Klaric.

Fuse aims to address these challenges by using AI-driven agents to help lenders handle larger volumes of loan applications, automate underwriting processes, and significantly lower operational expenses. The company reports that it already serves more than 100 customers. To encourage adoption among credit unions, Fuse is offering free access to its platform for the first 50 qualifying institutions until their existing contracts with legacy LOS providers expire. To support this initiative, the startup has set aside $5 million for what it calls a “rescue fund.”

Klaric emphasised that the initiative is more than a promotional tactic, explaining that the high cost of existing systems often prevents credit unions from switching providers before their contracts end.

Nikhil Basu Trivedi, co-founder and general partner at Footwork, said the investment is driven by the scale of opportunity in the U.S., where more than 4,000 credit unions operate on outdated technology systems.

“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 loan origination systems to enterprise tools like ERP and CRM platforms, highlighting their importance in daily operations. He noted that replacing an LOS has historically been a complex and difficult process. However, as with many AI-driven enterprise software startups, Fuse claims its solution can be implemented more quickly than traditional alternatives.

Among the established LOS providers, Fuse is aiming to compete with publicly traded nCino and MeridianLink, which is backed by private equity. The company is not alone in pursuing this space. Other startups, including Casca and Glide, are also developing AI-powered loan origination systems.

Klaric said his motivation is closely tied to the role credit unions play in serving the American middle class. “Credit unions and smaller financial institutions have everything required to win. They have local presence, local focus, and a great member experience. They even have branches in very good locations. The only thing they don’t really have is the right technology,” he said.