Fintech startup Cascading AI has raised $3.9m in a pre-seed funding round to support its efforts to transform the banking sector with an artificial intelligence (AI)-native loan origination system called Casca.

The financing round was led by Peterson Ventures, which invests in disruptive startups within the vertical software-as-a-service (SaaS) industry.

It also saw additional participation from Y Combinator, Sarah Smith Fund, and Clocktower Technology Ventures.

Cascading AI plans to grow its team of AI and machine learning engineers with the new capital.

Besides, the fintech startup will expedite the development of Casca and improve its human-in-the-loop, responsible AI capabilities.

Furthermore, the new fund will be utilised to get on board a select group of new banks.

Bankwell Bank chief innovation officer Ryan Hildebrand said: “We’ve just seen tremendous success with Casca, even in the first months.

“Casca helps bring leads that are five or six times the quality of what was coming in through organic marketing.”

Based in the US, Cascading AI was established by alumni of Stanford University and Y Combinator.

Casca, which is its flagship product, leverages breakthroughs in generative AI technology to significantly reduce the loan cycle time and boost efficiency. It also automates time consuming tasks in loan origination.

Cascading AI CEO Lukas Haffer said: “The real game changer is our AI Loan Assistant, Sarah.

“Imagine a small business owner applying for a loan on a Friday evening and waiting 72 hours for a response from a loan officer.

“With Casca, they receive an email response within minutes from Sarah – who leads them through the entire application process. Sarah is infinitely patient and infinitely kind; every loan applicant receives the care and attention they deserve.”