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CUNA Mutual Group and several credit unions participated in a $50 million round of additional funding for Zest AI, a Los Angeles-based CUSO that develops software for credit underwriting.
The round was co-led by existing software investor Insight Partners of New York and a new investor: CMFG Ventures, the venture capital arm of CUNA Mutual Group in Madison, Wis.
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Investments by CMFG plus those of other credit union-related participants made up more than half the value of the round. The other credit union-related participants were:
- Curql, which is pronounced like "circle" and based in Cedar Falls, Iowa, invested $5 million. The Curql Collective and the Curql Fund I venture capital fund were formed in 2020 and are managed by credit unions. Curql has invested $90 million in the last 18 months in 16 CUSOs.
- CU Direct, a California CUSO that does business as Origence. It operates the Origence Consumer LOS and CUDL lending platforms.
- Golden 1 Credit Union of Sacramento, Calif. ($18.3 billion in assets, 1.1 million members).
- Suncoast Credit Union of Tampa, Fla. ($15.7 billion in assets, 1.1 million members).
- Hawaii USA Federal Credit Union of Honolulu ($2.3 billion in assets, 134,785 members).
Also participating was NorthGate Capital, a San Francisco venture capital company that has previously invested in Zest AI.
A news release from Zest AI Wednesday said it plans to use the funds to rapidly expand access to AI-automated credit underwriting for all lenders. It said its goal is providing lenders more accurate and consistent underwriting decisions.
Mike Kraus, principal at CMFG Ventures, said its credit union partners have found Zest AI's technology to be "a great way" to automate their underwriting.
"Zest not only allows credit unions to make better loan decisions but also expands access to more affordable credit across the credit tiers," Kraus said. "The timing for credit unions to adopt more inclusive credit underwriting could not be better, and we're thrilled to help demonstrate Zest's value to the industry."
Zest AI said it is on target to nearly double its customer base this year after tripling it in 2021. To date, the CUSO has built over 250 AI-underwriting models. Clients include large banks such as Citibank, First National Bank of Omaha and Truist, as well as credit unions, including the three participating in the current funding round.
Darlene Johnson Darlene Johnson, EVP and chief growth officer at Suncoast, said the future of underwriting is automation and the ability to deliver better financial products and superior customer service.
"Zest AI is transforming the financial services landscape — in particular, for credit unions and their members," she said. "Investing in Zest means investing in our members' financial well-being. Our support will fuel the company's fidelity to advance AI in lending to the benefit of all credit union members from coast to coast."
Vystar Credit Union of Jacksonville, Fla. ($13.2 billion in assets, 847,497 members) co-led an $18 million funding round for Zest AI in June 2021.
Nick Evens, president/CEO of Curql Collective, said Zest AI uses artificial intelligence to render more consistent and equitable lending decisions, removing bias and streamlining the decision-making process.
Nick Evens "This solution helps credit unions live out the people helping people philosophy and help more people reach their financial goals," Evens said.
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Jim DuPlessis
Jim covers economic data trends emerging for credit unions, as well as branch news and dividends.
