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  • Writer's pictureW.B. King

Zest AI Takes Home FinovateFall 2021 Award for Best Use of AI/ML and Announces CUSO Designation

By W.B. King

Along with bringing a sense of normalcy back to the conference experience, the 2021 FinovateFall hybrid conference showcased forward-leaning technologies from more than 75 fintechs, 25 of which walked away with awards for excellence in respective categories.

The fintech hopefuls represented startups to established companies located in the U.S. and overseas. As per Finovate criteria, only the approximate 1,500 attendees not associated with demoing companies were eligible to vote. Additionally, Finovate employees did not vote. As per the FinovateFall conference website, the written instructions stated: “Please rate (the companies) on the basis of demo quality and potential impact of the innovation demoed.”

The award for the bank, financial institution, or fintech that uses artificial intelligence/machine-learning technology to the greatest effect went to Zest AI.

“Our mission since day one has been to make fair and transparent credit available to everyone. The best way to do that is by helping banks, and credit unions of all sizes adopt AI-driven risk models, make better decisions, and say yes to more people,” said Mike de Vere, CEO of Zest AI. “This award validates all the hard work ‘Zestians’ have put in to build the best AI lending solution.”

Mike de Vere, CEO of Zest AI.

Zest AI, along with its competitors in the category, Feedzai, FIS, Personetics and US Bank, HSBC and Socure, were informed in August that it qualified as a finalist. The companies were then given a short window of time to present respective demos during the conference – either in-person of virtually.

“Judges for the awards include media analysts, board members, bankers, fintech founders, and more. Each judge took a record number of nominations and distilled them down to just a single winner in each category,” explained Zest AI Spokesperson Bruce Upbin. “We definitely felt like this was ‘our year”’ to win given that we came so close last year.”

This was the first time Zest AI has won this award, although the Los Angeles –based company was a finalist in 2020 in the same category. And while the Zest AI team has attended the conference in-person in previous years, Zestians didn’t travel to this year’s conference that took place in New York City due to COVID-19 Delta variant concerns.

Upbin said the award is a signal that their hard work is paying off. In recent years, and in an effort to make better underwriting decisions, he noted that a growing number of banks and credit unions have tapped Zest software.

According to a company statement, “Lenders using Zest-built models have seen 15% to 20% increases in approval rates with triple the automation and more inclusion.” Additionally, the company notes that Zest customers have delivered “nearly seven million AI-powered scores to date across more than $120 billion in portfolios.” As a result, lenders with Zest have saved more than $1 billion in profit from reduced credit losses.

Becoming an Official CUSO

On the heels of winning the FinovateFall Award, Zest AI announced that it received registered status as a Credit Union Service Organization (CUSO) and an equity investment from the Curql Fund, a leading venture fund for the credit union industry.

“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,” said de Vere. “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.”

Curql Collective’s President and CEO Nick Evens explained that the company’s venture capital fund, Curql Fund, invested in Zest AI, which used said funds to close out its Series E at $40 million. Formed in 2020, Curql is steered by a collective of forward-thinking credit unions, including former founders, operators, and leaders in the fintech and venture capital spaces.

“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 Evens.

This move to become a CUSO has long been in the works, explained Upbin. There are, however, two critical components required to receive CUSO status. The first, Upbin noted, is primarily serving the credit union industry, and with credit union partners in Florida, Iowa, and Hawaii, Zest AI checked that box.

The other important requirement is for a company to be owned (in part or whole) by a credit union.

“Earlier this year, we secured an investment from VyStar Credit Union, which we will use to accelerate the adoption of Zest’s Model Management System for creating and deploying powerful, explainable, and compliant AI-based credit underwriting models,” said Upbin. “This investment from VyStar Credit Union helped us achieve this requirement to be able to register to become a CUSO.”

The Future of Underwriting and AI

When asked what separates credit unions from banks, Upbin said that credit unions are focused “solely on meeting the needs of their members with efficiency and more reasonable economics.” And due to their non-profit status, he added that credit unions can typically charge lower fees and lower rates on loans.

“Compared to larger financial institutions and banks, credit unions are less bureaucratic and move faster when they see an investment worth making to improve their underwriting efficiency and member experience. Especially now, with deposits surging and mounting pressure to find loan growth, they are adopting technology like AI-driven underwriting a lot faster than banks to fuel this growth,” said Upbin. “AI underwriting can increase their approval rates by 20% to 30% with no added risk, and drive far higher levels of automation in loan decisions.”

The CUSO status has already made a difference. In the past few weeks, Zest AI welcomed GreenState Credit Union, HawaiiUSA Federal Credit Union, IH Credit Union and Credit Union West as new clients.

“We’re convinced the future of underwriting will be based on machine learning,” said Credit Union West’s Vice President and Chief Lending Officer Bob Birr. “We looked at a range of machine learning 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.”

By year-end, across its client base, Upbin said Zest software will power underwriting for a combined 10 million credit union members.

“Credit unions are gravitating towards Zest AI because they want to enrich their communities by saying ‘yes’ to more of their members. AI-driven lending helps them do that faster and with more confidence,’ said Upbin. “Two years ago, Zest had one credit union customer with 700,000 members. No one [company] has more live AI models in production at credit unions than Zest AI and our lead continues to expand.”

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