Stripe's First Employee Buys a Bank

Increase CEO Acquires Stake in Twin City Bank

Within the financial technology sector, it's widely known that Darragh Buckley, founder and CEO of Increase, has long pursued the acquisition of a bank, according to a source who shared this information with TechCrunch.

Recently, he effectively achieved this goal.

Transaction Details and Regulatory Scrutiny

Buckley secured a substantial ownership position in Twin City Bank, necessitating a public filing with the Federal Reserve Board. This share purchase is now subject to review and approval by the FDIC. Twin City Bank is a community financial institution located in Longview, Washington, approximately one hour north of Portland, Oregon.

The triggering threshold for public disclosure was a stake exceeding 10%. Buckley verified the transaction to TechCrunch, but refrained from revealing the precise size of his investment.

While the exact percentage remains undisclosed, it’s understood Buckley isn’t the bank’s only owner. Nevertheless, a holding of over 10% designates him as a significant shareholder. For context, publicly traded companies are required to report ownership stakes of 5% or greater.

Industry Speculation and Increase's Ambitions

Several sources within the industry have suggested that Buckley’s motivation for acquiring the bank is to support the growth of Increase, his banking-as-a-service (BaaS) startup.

Remarkably, an unidentified party – likely a competitor – actively attempted to discredit the deal by engaging a public relations firm to generate unfavorable press coverage concerning Buckley and the acquisition.

Buckley's Perspective and Future Plans

However, Buckley clarified to TechCrunch that this represents his third investment in a Washington-based community bank, and his objectives differ from those perceived by his rivals.

He emphasized that this investment is not intended to result in Increase owning the bank. “Twin City Bank is, and will remain, a community-focused bank,” Buckley stated.

His commitment is to maintaining the bank’s existing community focus.

A New Banking Strategy Emerges in Silicon Valley

Increase provides an API platform, enabling the programmatic delivery of various financial services. This includes the automation of processes such as ACH transactions, wire transfers, and real-time payments. The majority of Increase’s clientele consists of other companies within the fintech sector, including firms like Ramp, Check, and Pipe.

Having served as Stripe’s inaugural employee, Buckley is widely recognized within the fintech community as a highly skilled engineer. Industry sources have confirmed to TechCrunch his strong technical standing among colleagues. Notably, even some competitors in the Banking-as-a-Service (BaaS) space direct clients to Increase when they lack the capacity to fulfill specific requests.

The Role of Banking Partnerships

Similar to many fintech companies, Increase operates through partnerships with FDIC-insured banks, sharing revenue in the process. Directly acquiring banking licenses is a complex and costly undertaking. Even prominent fintechs like Chime, which provides checking and savings accounts and recently went public, rely on banking partners rather than holding their own FDIC insurance.

Currently, Increase collaborates with both Grasshopper Bank and First Internet Bank of Indiana. Buckley has stated he holds no personal financial stake in either institution.

Navigating a Competitive Market

The Banking-as-a-Service (BaaS) market is notably crowded and highly competitive. This has prompted a select few companies to pursue an alternative strategy for differentiation: the direct acquisition of smaller community banks, thereby eliminating the need for external banking partners.

A prominent illustration of this trend is William Hockey, a co-founder of Plaid, whose current fintech venture, Column, purchased Northern California National Bank for $50 million in 2021. Another example is Lead, a Kansas City-based bank acquired and managed by former Block executives Jackie Reses, serving as CEO, and Ronak Vyas, the CTO.

This approach allows these fintechs greater control and potentially reduced costs compared to relying on traditional BaaS arrangements.

Potential Risks Associated with Fintech Collaborations

Buckley affirms that his intention is not to establish Twin City as an exclusive banking partner for his firm, nor to significantly increase its income through numerous fintech collaborations akin to those of Increase’s clientele. He acknowledges the inherent risks associated with such arrangements.

Consider Evolve Bank, a financial institution that provided services to a wide range of fintech companies, including Affirm and Stripe. In 2024, it became the victim of a substantial ransomware attack. This incident occurred shortly after the Federal Reserve issued a cease-and-desist order to Evolve, citing deficiencies in its risk management protocols.

The bank was subsequently mandated to address numerous compliance issues. (Evolve was also linked to the collapse of the Banking-as-a-Service startup, Synapse.)

“Twin City Bank should refrain from engaging in sponsor banking,” Buckley stated, referencing partnerships with fintechs. “Effective and secure partner oversight necessitates specialized capabilities and capacity. Only banks with dedicated expertise should pursue this model.”

The substantial investment was made not for the direct benefit of Increase, but due to Buckley’s affinity for community banks. He views them as the underrepresented entities within the banking sector.

“A common perception within the financial technology industry suggests that community banks are unable to achieve independent growth. However, their core strength lies in their established relationships and localized expertise,” he explained.

Should Buckley’s strategy for the bank evolve, his competitors in the Banking-as-a-Service space will be closely monitoring the situation. Regarding the unidentified party attempting to impede the deal, it is now inconsequential; Buckley confirmed receiving the FDIC’s approval for control and the transaction has been finalized.