Nextcard, Inc
Running Head: Nextcard
Nextcard, Inc
Background Nextcard, Inc was a model for successful people who were looking to the internet in the 1990’s as an enterprise. Nextcard was founded in 1996 in California as the first credit card company to issue cards online. Since the internet was still being introduced to households throughout the United States internet companies were still developing effective methods to reach potential customers. One of the driving factors behind Nextcard believing that it could succeed in the credit card industry was it believed that it could cut cost that tradition ‘brick and mortar’ credit card companies could not. During the 1990’s it was believed that the people who were using the internet were generally more affluent than your average consumer.
Third Party Problems
Nextcard was unable to meet its own expectations and the philosophy behind the corporate ideas were beginning to fail. As it turned out, people were using Next card as a last resort for credit and had less than idea credit scores. In addition to this, the cost of obtaining a new customer was much higher than anticipated. All of this led to a culmination of a virtually dead IPO that was launched in 1999 during the tech bubble bursting, virtually shutting off all options to this struggling company (General Information, FDIC).
This lead to floating the company until 2001 and it was reported that the company was severally undercapitalized, causing the FDIC to launch a full scale investigation. However, instead of owning up to the problem at hand, Nextcard fraudulently claimed that its losses were due to fraud and not credit losses; its allowance for bad debt was never appropriately assessed.
Fraud Risk Factors
The truth is that fraud can happen in just about any company given the right circumstances, in the audit world, we usually refer to this as the fraud triangle. But at Nextcard it was more than just a few people given
Nextcard, Inc
Background Nextcard, Inc was a model for successful people who were looking to the internet in the 1990’s as an enterprise. Nextcard was founded in 1996 in California as the first credit card company to issue cards online. Since the internet was still being introduced to households throughout the United States internet companies were still developing effective methods to reach potential customers. One of the driving factors behind Nextcard believing that it could succeed in the credit card industry was it believed that it could cut cost that tradition ‘brick and mortar’ credit card companies could not. During the 1990’s it was believed that the people who were using the internet were generally more affluent than your average consumer.
Third Party Problems
Nextcard was unable to meet its own expectations and the philosophy behind the corporate ideas were beginning to fail. As it turned out, people were using Next card as a last resort for credit and had less than idea credit scores. In addition to this, the cost of obtaining a new customer was much higher than anticipated. All of this led to a culmination of a virtually dead IPO that was launched in 1999 during the tech bubble bursting, virtually shutting off all options to this struggling company (General Information, FDIC).
This lead to floating the company until 2001 and it was reported that the company was severally undercapitalized, causing the FDIC to launch a full scale investigation. However, instead of owning up to the problem at hand, Nextcard fraudulently claimed that its losses were due to fraud and not credit losses; its allowance for bad debt was never appropriately assessed.
Fraud Risk Factors
The truth is that fraud can happen in just about any company given the right circumstances, in the audit world, we usually refer to this as the fraud triangle. But at Nextcard it was more than just a few people given
References: Associated Press (September 29, 2004). Retrieved October 26, 2013 from http://articles.latimes.com/2004/sep/29/business/fi-next29 General Information (n.d.). Retrieved October 26, 2013 from http://www.fdic.gov/bank/individual/failed/nextbank.html General Information (n.d.). Retrieved October 26, 2013 from http://securities.stanford.edu/1024/NXCD01-02/ Michael Liedtke (September 7, 2002). Retrieved October 26, 2013 from http://articles.latimes.com/2002/sep/07/business/fi-nextcard7