Summary
Increase Bank, launched by Stripe's first employee Darragh Buckley, collapses the three-layer BaaS structure (fintech → middleware → sponsor bank) into a single regulated entity. By acquiring Twin City Bank ($75M assets, single branch, clean regulatory record), Increase becomes both the technology provider and the FDIC-member institution. The key architectural insight: the compliance problem in BaaS is not a process problem that better contracts can fix — it is a structural problem that requires owning the regulated layer, not partnering with it.
Key Points
- Standard BaaS: 3 entities, 3 ledgers, 3 sets of compliance obligations — ledgers can diverge
- Synapse collapse (2024): ledger divergence stranded ~100,000 consumers, $65-96M shortfall
- Increase Bank: 1 entity, 1 ledger, reconciles to Federal Reserve in real time
- Direct Fed connection since 2020 (not through intermediary bank)
- Payment rails: FedACH, Fedwire, Check 21, RTP, FedNow, Visa — all through single API
- Clients: Gusto, Ramp, Stripe — synchronous account opening from day one
- Buckley: Stripe's first employee, 6 years building Stripe's Wells Fargo partnership
- Twin City Bank: $75M assets, single branch, Satisfactory CRA rating
- Third community bank investment in Washington state
- Profitable since 2025, self-funded, monthly payment volume tripled YoY
- Tradeoffs: safety-and-soundness exams, capital adequacy, CRA obligations
- Similar path: Column (William Hockey, Plaid) with Northern California National Bank
- Fintech sector: $650B+ revenue in 2025, growing ~21% annually (McKinsey)