This PEST analysis is conducted at a macro level to examine the technological advancements which would propel and prove viable for Nexity to launch into the virtual banking industry in the 21 century. Political Factors In 1999, Rep. Bob Goodlatte (R-VA), Rep. Zoe Lofgren (D-CA), and others sponsored and submitted a bill to congress to be reviewed so as to change the export controls on encryption software or tools which could be used globally or exported out of country (Encryption rights in the U. S. and encryption export restraints. 1999).
This bill which eventually was approved in year 2000 would allow clients of virtual banks to transcend physical barriers to invest and maintain accounts in the U. S. without the fear for the security of their transactions or the need for physical presence either locally or while away from the U. S. This would also allow global U. S companies to conduct the banking through the internet from their branch offices out of the U. S thus increasing the potential number of clients.
To further regulate and provide a secure environment, Webtrust was launched with guidelines and audit processes for all e-commerce entities (American Institute of Certified Public Accountants, Inc. and Canadian Institute of Chartered Accountant 1999).
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This e-commerce certification was spear headed by American Institute of Certified Public Accountants, Inc. and Canadian Institute of Chartered Accountants and endorsed by US Federal Trade Commission to provide seal of trust for participating merchants.
The certification program will authenticate the trade and security process of Nexity, as such allowing users to be confident of the services offered by Nexity. Though changes in laws and governance of virtual banking services assured users of their transactions, there was a lurking issue with the dawn of the millennium. The Millennium bug or commonly known as “Y2k bug”, was first mentioned on a Usenet newsgroup occurred Saturday, January 19, 1985 by Usenet poster Spencer Bolles (Wikipedia. org n. d. ).
A poll was conducted by CNN/USA Today/Gallup in partnership with the National science Foundation to reflect consumer believes and understanding of the Millennium Bug. The poll conducted in May, 1999 showed that 21% of people who believed that the Millennium bug would bring about major problems and 30% would withdraw a large amount of cash to be stored away. Though the numbers are not the majority, it clearly explains there are concerns, and it would be greater for services delivered from virtual platforms.
Furthermore, there would be exposure to risk and cost in identifying if there are problems with the technology if launched prior to start of the millennium. Economical Factors Nexity would require strategic partnerships which will enable it to launch itself into the market without huge investments costs in technology development and a quick development turn-around time for its launch.
Fiserv Inc who was providing software and technology backbone for Financial Systems leveraging on their technological advancements through rapid acquisitions of 73 companies since 1984 till 1998 and a corporate clientele of 400 over 60 countries in late 1999 proved to be a potential reliable partner. Part of Fiserv’s business-unit director’s compensation was in relation to the bi-yearly feedbacks of their client’s and this identifies their willing intent to improve and provide better for their products and for the clients. Mote, Dave n. d. ) While the server end of the financial systems are could be handled by strategic technology partner like Fiserv, the client end of Fiserv’s virtual banking system depended on third party solutions provided by web-browser development companies, like Netscape and Microsoft whose products were the dominant browsers, Netscape Browser and MS Internet Explorer, holding 24. 68% and 75. 31% of browser market share respectively (WebSideStory n. d. ).
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Thus allowing Nexity to completely eliminate the cost of client-end development and pre-deploy their client-end to almost any computer which was used during 1999 to roam the internet, making Microsoft and Netscape a strategic partner as well. In 1998, with the amendment to the Banking circular 203 and the issuance of SOP 98-1 (Statement of Position 98-1) that allowed banks to capitalize on stage 2 of the software development cost meant that the earnings and margin of the bank will not be as severely impacted.
SOP 98-1 allowed the capitalized software costs derived through development or purchasing to be amortized on a straight line basis or alternative basis that can closely represent the use of the software. Instead of taking a hit of the total development costs to the profit margin of the bank during the development phase before putting the software to use, the bank is now able to defer the costs in the balance sheet and match the costs to the period of use over the expected lifecycle of the software. Social Factors
Through a survey conducted by ZDNet InternetTrak, the banking sector was expecting increase of 42% of e-banking participants by end of 1999, which would place the potential number of clients to 12. 8 million users. (Levin and Nash 1999).
Furthermore, in survey conducted by The Strategis Group, a Washington-based market research firm, 50% of the United States’ adults had access to the internet and The International Data Corporation, another market research firm, projected that by end of 2003 the number of users would exceed 177 million (The New York Times – Business 1999).
The Essay on Impact of Foreign Banks on Banking in Emerging Economies
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