Zest AI, a Burbank-based financial services company, has announced that it raised more than $50 million in a new growth round. The round was co-led by existing global software investor Insight Partners and new investor CMFG Ventures, with participation from CU Direct, Curql, Suncoast Credit Union, Golden1 Credit Union, Hawaii USA Federal Credit Union and NorthGate Capital.
Zest AI plans to use the new funding, which was announced last week, to expand access to its credit underwriting for lenders.
According to the company, Zest’s technology uses AI to identify, predict, and remove biases and render more consistent and equitable lending decisions. The technology allows customers to approve more borrowers without taking on more risk, resulting in a 25% increase in approvals.
“The industry has been looking for an alternative to the existing credit system for some time,” said Mike de Vere, founder and chief executive of Zest AI. “So, coming up with a solution that allows for a financial institution to take a broader view on their member, or their customer is exciting.”
Zest AI’s technology is informed by data tailored to individual borrowers, as well as the community a credit union serves.
The company sells a technology license to financial institutions that vary in size and levels of customization. De Vere said he thinks it’s important, because one size doesn’t fit all.
“If we think of Golden 1 Credit Union, the biggest credit union on the West Coast, they have a tailored and custom model towards the members and communities that they serve,” De Vere explained. “Now, if we think on the flipside, there’s also All In Credit Union in Alabama, it’s a totally different group. It’s a totally different model because it’s tailored to residents of Alabama.”
According to the company, having underwriting models that are tailored for each individual financial institution opens up opportunities to a wider part of society.
Lonne Jaffe, managing director at Insight Partners, said in a statement, “Zest AI’s accelerating growth is a testament to the power and value of its advanced explainable AI technology for loan underwriting. By using more features, or ingredients, in its prediction system, Zest’s customers can issue more loans, take less risk, and be more inclusive — all while adapting more quickly to changing macroeconomic conditions and explaining loan decisions more effectively. We look forward to doubling down on our partnership with Zest as they rapidly scale up.”
According to the company, it is on target to nearly double its customer base this year after tripling it last year. To date, the company has built more than 250 AI-underwriting models tailored to the clients of the lenders it partners with, including Citibank, First National Bank of Omaha, Truist and Hawaii USA Federal Credit Union.
Darlene Johnson, executive vice president and chief growth officer at Florida-based Suncoast Credit Union, said in a release, “Zest AI is transforming the financial services landscape — in particular, for credit unions and their members. The future of underwriting is automation and the ability to deliver better financial products and superior customer service. 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.”
Over the last few months, Zest has announced partnerships with additional financial tech companies including WithClutch, Equifax and Origence.
“I think that what you will see throughout the next 12 months is Zest continue to announce partnerships with key tech partners like Origence, where we believe not only that our technology will help, but actually serve communities and members,” De Vere said.