The local bank branch is not quite dead

Branch strategy
I don't go into my local bank branch on a regular basis anymore, at least not since ATMs became a thing. But I do still sometimes find myself with a reason to go inside. It's always a bit jarring. My local branch still has the gigantic steel door that protects the vault, but the row of teller stations were ripped out some time ago. Today the lobby comprises some couches and some mini-office cubby holes where people can talk quietly. It's more coffee lounge than bank. If you want to make a normal transaction, a deposit, a withdrawal, yada yada yada, they look at you a bit funny. Nobody's actually a "teller" in my local branch anymore.

Right across the street from my local branch there is an empty building that used to be the local branch of a competing bank. And two blocks west of that there is another empty building that also used to be the branch of another competing bank. At the edge of town there is yet another empty building that used to be the branch of yet another competing bank that almost got turned into a Starbucks but locals balked about it having a drive-through and the Starbucks people apparently wouldn't convert it without the drive through. So it sits empty.

Yes, there are more empty buildings in my town that used to be bank branches than there are occupied buildings that are currently bank branches. And yet, the bank branch isn't dead, as our Catherine Leffert writes. One surprising theme that was mentioned on several conference calls this week was bank branches. As in, banks are still opening up new branches. JPMorganChase and Bank of America are both opening new branches; not many, mind you, but they are opening them. PNC is getting new branches through acquisitions as well as opening new locations. 

It's hard to argue that bricks and mortar will be a better strategy than going digital, but I'm not here to take the easy way out. The reality is that people still live in a world that is physical and there is a degree of association with the physical that does not exist with the digital. Yes, it may be easier to get new customers through an app, something OpenAI of all outfits seems to be turning into a strategy. But I'll bet it's easier to lose them on an app, too. I'd imagine this is something community bankers already know: that when a customer can put a face with a business and a service, they are more likely to stay with that face and business.

And hey, after Mythos reveals that nobody's code is safe, maybe everybody will go back to doing things the old fashioned way.

Release the Kraken's data
Speaking of protecting online systems…

When you are first, everything is different for you. You're not like everybody else. You set the standards.

Kraken was the first crypto company to receive a sort-of master account at the Federal Reserve. I say sort-of because the approval the firm got was for a limited-purpose master account, one that the Fed's vice chair for supervision, Michelle Bowman, viewed it as a test case, "a bit of an experiment."

The experiment is already proving interesting.

Kraken reported this week that malefactors are trying to extort the company, after somehow compromising Kraken employees into giving access to the company's internal systems. Carter Pape has a deep dive into what happened. The attackers are threatening to release videos of the exchange's internal systems; it's not clear what they are asking for. I'd imagine money, lots of money, but Kraken isn't saying what the demands are. It is saying that it flat-out refuses to accede to those demands, which, like, great. Glad to hear it.

But it raises uncomfortable questions for the entire crypto industry. They have been boisterously trying to buy their way into the big leagues, lavishing millions on politicians, suing for access to the Fed's payments systems, insisting that the future is here and they are it. But it's a pretty bad look, no matter the severity of the actual attack, for the very first crypto outfit to get access to the Fed's rails to get compromised a month and a half later. And, yes, sure, banks get attacked as well. And both AI and quantum computers promise to make it even harder for all kinds of institutions to protect themselves. But the bar for crypto is higher. They have more to prove. If the industry doesn't want Kraken's bit of an experiment to end here, it'll have to do better. That may not be fair, but nobody told them to build a financial system around irreversible crypto transactions.

Lastly, just a reminder: if you have any thoughts I'm always happy to hear them. Write me at paul.vigna@arizent.com.