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. The architecture eliminates the middleware ledger divergence that stranded 100,000 consumers during the Synapse bankruptcy. By owning both the technology and the charter, Increase Bank maintains a single system of record that reconciles directly to the Federal Reserve in real time.
Key Points
- Structural problem: Standard BaaS has three entities (fintech, middleware, sponsor bank) each maintaining separate ledgers. When ledgers diverge, no single entity has an authoritative record. Synapse's 2024 bankruptcy exposed this: ~100,000 users locked out, $65-96M shortfall.
- Increase's solution: One entity, one record. The bank's technology maintains the system of record and reconciles to the Federal Reserve in real time. No middleware ledger that can diverge.
- Direct Fed connections: Increase has connected directly to the Federal Reserve since 2020 — not through an intermediary bank. This made the charter acquisition a structural completion rather than a strategic pivot.
- Acquisition mechanics: Buckley acquired Twin City Bank ($70M assets, single branch in Longview, WA) via its holding company in April 2025. FDIC non-objection received. Assets grew 48% to $114.5M in one year.
- Tradeoffs: Charter imposes capital adequacy requirements, CRA obligations, and direct FDIC examination. A pure-software BaaS provider can minimize regulatory surface area in ways a chartered bank cannot.
- Precedent: Column (William Hockey of Plaid) took the same approach with Northern California National Bank in 2021. Lead Bank in Kansas City followed under former Block executives.
- Clients: Gusto, Ramp, Stripe. Processes hundreds of billions annually across ACH, wires, RTP, FedNow, checks, and cards.