Fintech Zest AI Becomes a CUSO

Zest AI, a Los Angeles-based provider of artificial intelligence-powered loan underwriting software, has further solidified its role in the credit union industry by officially becoming a CUSO, Zest AI announced Wednesday. In addition, it received a new investment from credit union industry-focused venture capital fund Curql and welcomed four new credit union clients.

To achieve its CUSO status, Zest AI had to demonstrate that it primarily serves the credit union industry and is owned in part or wholly by a credit union. In June 2021, VyStar Credit Union ($11 billion, Jacksonville, Fla.), along with First National Bank of Omaha and venture capital company NorthGate Capital, announced an $18 million investment in Zest AI, enabling the fintech to qualify as a CUSO.

“Credit unions are our fastest growing customer segment, and I’ll tell you why: Credit unions want to enrich their communities by saying ‘yes’ to more of their members,” Zest AI CEO Mike de Vere stated. “AI-driven lending helps them do that faster and with more confidence. Credit unions that use Zest software are going to have a major advantage over banks and fintechs.”

The Curql investment totaling an undisclosed amount closed out Zest AI’s Series E round of funding at $40 million, the CUSO said. “Zest AI is bringing meaningful change to credit unions and better experiences for their members through technology, and we couldn’t be happier to support that mission,“ said Craig Ibsen, managing partner of Next Level Ventures, a Des Moines, Iowa-based venture capital fund that manages the Curql Fund.

With the addition of four new credit union clients, Zest AI estimated that its software will be powering underwriting for approximately 10 million credit union members by year-end. The four new clients are:

• GreenState Credit Union ($7.6 billion, North Liberty, Iowa)
• HawaiiUSA Federal Credit Union ($2.2 billion, Honolulu)
• Credit Union West ($1 billion, Glendale, Ariz.)
• IH Credit Union ($315 million, Springfield, Ohio)

“We’re convinced the future of underwriting will be based on machine learning,” Bob Birr, vice president, chief lending officer for Credit Union West, said. “We looked at a range of ML options, and Zest AI provided the biggest impact in terms of higher funded loan approvals and reduced risk across cards, auto loans and personal loans. Partners like Zest can help us improve the member and employee lending experience and fulfill our vision of being our members’ trusted financial services provider for life.”

In May 2021, Zest AI expanded its services to Suncoast Credit Union ($13.8 billion, Tampa, Fla.), Coastal Federal Credit Union ($4.2 billion, Raleigh, N.C.) and Altra Federal Credit Union ($2.1 billion, Onalaska, Wis.).

Founded in 2009, Zest AI’s software is designed to help banks and credit unions go beyond the statistical and data limitations of traditional credit scores to identify good borrowers who are often overlooked by legacy techniques. It said its models generate up to 20% increases in approval rates with no added risk, and up to 50% reductions in charge-offs by using more data and the advanced math of machine learning.