Online lending software company Zest raises $50 million

Online lending software company Zest has raised more than $50 million in its latest growth round co-led by Insight Partners and CMFG Ventures, the company announced Tuesday.

Zest will use the funding to scale its AI-based credit underwriting platform. The company says its underwriting software increases transparency and reduces bias in the underwriting process.

“We are working to build a better future for the financial services ecosystem where underwriting is fast, fair and frictionless across the United States,” Zest AI CEO Mike de Vere said in a statement. “Our job is to help our customers approve more loans efficiently and with confidence, creating economic opportunity for all consumers.”

The growth funding round also included CU Direct, Suncoast Credit Union, Golden1 Credit Union, and Hawaii USA Federal Credit Union, among others.

The company, which has built more than 250 AI underwriting models, expects it to nearly double its customer base in 2022 after tripling the metric in 2021. Customers include Citibank, First National Bank of Omaha and Truist.

Zest trains machine learning to broaden data sources with the goal of reducing bias. This produces reports of 50 to 100 pages explaining every feature for every model it produces and it provides a 20-page Fair Loan Report explaining each variable’s contribution to a disparate impact, Zest’s general counsel Teddy Flo told American Banker earlier this year.

Lonne Jaffe, managing director of Insight Partners, said in Tuesday’s statement that Zest is using more functionality in its prediction system to originate “more loans, take less risk and be more inclusive.” Mike Kraus, principal of CMFG Ventures, also said in a prepared statement that Zest enables credit unions to access more affordable credit at all credit levels.

Flo told American Banker last year that Zest works with credit unions to create models to perform fair lending analyzes within demographics.

Insight Partners, which manages over $80 billion in assets, invests in software around the world. CMFG is the venture capital arm of CUNA Mutual Group, which works with credit unions on financial products and services.

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