In 2023, after three years dedicated to an automotive lending startup, co-founders Andres Klaric and Marc Escapa identified a more profound opportunity for modernization through large language models (LLMs): the loan origination system (LOS). Recognized as the foundational infrastructure of the lending industry, the LOS presented a significant challenge due to its outdated nature.
Driven by frustration with the inherent limitations of conventional software, Klaric, a Bolivian native, and Escapa, a Spanish immigrant, strategically redirected their venture. Their new focus was the development of Fuse, an innovative AI-native LOS designed to address these long-standing industry inefficiencies.
This past Monday, Fuse publicly announced the successful closure of a $25 million Series A funding round. The investment was spearheaded by prominent firms including Footwork, Primary Venture Partners, NextView Ventures, and Commerce Ventures.
The LOS functions as the core system of record for the majority of lenders, orchestrating the entire loan lifecycle from the initial application and underwriting phases through to final approval and credit disbursement. However, as Klaric highlighted, traditional systems are plagued by integration timelines that can extend up to a year, coupled with multi-year, often costly, contractual agreements.
By harnessing the power of artificial intelligence, Fuse asserts that its advanced agents can empower lenders to manage increased loan volumes, automate complex underwriting processes, and achieve substantial reductions in operational expenditures.
With an existing customer base exceeding 100 institutions, Fuse is committed to facilitating a seamless transition for credit unions. The company is offering the first 50 qualifying institutions complimentary access to its platform until their existing contracts with legacy LOS vendors expire. To underpin this initiative, Fuse has allocated $5 million towards a dedicated program it terms a ‘rescue fund.’
Klaric firmly asserts that this program “it’s not just a marketing gimmick.” He elaborated that the high costs associated with legacy software frequently prevent many credit unions from being able to terminate their current contracts and switch providers.
Nikhil Basu Trivedi, co-founder and general partner at Footwork, conveyed to TechCrunch his rationale for backing Fuse: the recognition that over 4,000 credit unions in the United States are operating with technology long overdue for a comprehensive overhaul.
“We know the credit unions are really hurting and want to adopt AI, but have no idea how to do it,” he stated, underscoring the pressing need for accessible AI solutions within the sector.
Basu Trivedi drew a parallel between the LOS and critical enterprise systems like ERP or CRM, emphasizing its equally vital role in a credit union’s daily operations. He acknowledged that replacing one LOS with another has historically been an arduous process. Yet, mirroring the promises of many AI-driven ERP-type startups, Fuse's founders pledge that their platform can be adopted with relative speed and ease.
Among the established legacy LOS systems that Fuse aims to disrupt are publicly traded nCino and private-equity-owned MeridianLink.
It is important to note that Fuse operates within a competitive landscape; it is not the sole startup developing an AI-infused LOS. Other emerging competitors in this space include companies such as Casca and Glide.
Klaric expresses a strong conviction in Fuse's mission to help credit unions reduce costs, primarily because these institutions are crucial service providers to 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 concluded, highlighting the pivotal role technology plays in their future success.
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