Neexity Bank Case Study

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Part A: INTRODUCTION
Introduction:
Nexity Bank is a virtual bank, created by David Long and CEO Greg Lee along with two other partners in 1999. Nexity’s main headquarter is located within Birmingham, Alabama. This company has focused its efforts on providing exceptional customer service and competitively advantaged priced products, which has led the business to such great success. Nexity offers transactions and account inquiries, online statements, only viewing of cancelled cheques, interest bearing checking, savings, money market and online bill payment accounts for free. They also focus on providing customers with competitive rates on home equity lines and loans, certificates of deposits and annuities.
History of the banking industry:
During the late 1980s, the U.S banking industry underwent many rapid changes. The changes were due to financial legislation passed by Congress as a means to integrate the U.S financial system in terms of activities and products. After the crash of the stock market and the failure of numerous U.S banks, apprehensive of the weakened financial institutions, people began to lose trust and confidence in the banking industry. As a result, Congress introduced the Glass-Steagall Act, which limited the functions of the banks, this act limited them out of certain financial areas and limited the number of services they could provide. Congress also created the Federal Deposit Insurance Corporation (FDIC) which insured banking deposits for consumers. This created a new means of confidence for consumers in placing their money in banks.
Eventually, the banking industry had recovered from the stock market crash and gained back confidence from consumers. Thereafter the banking industry grew rapidly after the Great Depression and World War II. In 1956, the Douglas Amendment was added to the Bank Holding Act in the attempts to keep the banking industry highly fragmented. Eventually, in the late 1970s and 1980s, states began loosening their restrictions on statewide and interstate branching, allowing banks to branch into multiple states. This eventually lead to a new law in 1994, the Reigle-Neal Interstate Banking and Branching Efficiency Act allowing bank holding companies to establish or acquire banks anywhere in the country, regardless of state of law. As banking continued to change, Congress felt the need to update the Glass-Steagall Act, limiting banks from moving into diversified product offerings. On November 12, 1999, the Gramm-Leach-Biley Act was passed, abolishing the Glass-Steagall Act and allowing banks, securities firms, and insurance companies to affiliate with one another in a new financial holding company structure. This act increased competition and merger activities within the banking industry.
Recent Trends in the Banking Industry:
There was an increase in institutions within markets that led to mergers and acquisitions but also the failure of many banks. Between 1980 and 2002, the number of banks in the U.S dropped by nearly 50 percent. The number of banking institutions was decreasing in size, but the asset size of existing banks was increasing, along with the numbers of branches. Consolidation of mergers slowed down by 2002, and the number of banking institutions in the U.S had declined at a rate of only 2-3 percent annually beginning in 1998. In 2002 and 2003, consolidation trends were once again picking up.
Scandal:
There were numerous cases of known scams occurring within the banking industry. Illegal dealings with companies, corporate fraud and deceit shook consumer confidence in accounting firms, banks, and companies they represented. This caused a lack of trust between the banking industry and consumers, thus resulting in higher customer retention.
Technology in the Banking Industry:
Many predicted that technology would revolutionize the banking industry, leading to the slow death of branches. However, branches were seen once again as a primary means of capturing and
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