SALEM, Ore. -- Laborious and not the best use of employees' time. That's how Robbie Wright describes the deposit reclassification software options in the industry three years ago when $282 million MaPS Credit Union set out on a quest to find a compatible solution.

"We looked at the available products and we were very much dissatisfied so we decided to write our own," said Wright, general manger of fi-linx, MaPS' technology solutions CUSO, who was also heavily involved along with the IT team in creating its own deposit reclassification software.

Still relatively new to credit unions, deposit reclassification has been around since 1993 when the Federal Reserve Bank allowed the practice to occur. Banks have flocked to the account structuring more with roughly 2,000 of them approved by the Fed to engage in the process. Wright estimates that there are about 100 credit unions involved in deposit reclassification. The credit union numbers are smaller because financial institutions are required to first have $50 million in checking accounts in accordance with Fed reserve requirements, he explained.

Deposit reclassification splits each transaction account into two separate subaccounts--a transaction (checking) subaccount and a non-transaction (savings) subaccount. Throughout each month, as the account holder deposits and withdraws money, a deposit reclassification program automatically transfers the balances in each subaccount to reflect the transactions in the original account. The new transaction subaccount is fully reserved on, while the new non-transaction account does not carry a reserve requirement.

The savings subaccounts, like all non-transaction accounts, carry no reserve requirement, but are limited to six electronic withdrawals per month.

MaPS believed so strongly in fi-linx that Wright, a former sales and service manager at the credit union, moved to the CUSO in September 2007 as its full-time general manager to "give it the attention it deserved." Through a leasing arrangement, fi-linx contracts with MaPS for use of its IT professionals.

At press time, fi-linx was finalizing a contract with a marketing association and a licensing agreement with another entity whose client list is 20% credit unions and 80% banks. Based on feedback, Wright said an internal deposit reclassification is in the development phase so that credit unions can install it and run it themselves. A beta test is tentatively scheduled for May.

"The development of fi-linx came from questions being asked," said Dan Penn, president/CEO of MaPS. "I've been with the credit union for 28 years. The idea of coming up with new and unique things for the organization is something we're always looking for but it seems our younger executives have the ideas and are asking 'what can we do differently.'"

In addition to providing all the computer and software management, fi-linx keeps up to speed on any regulatory updates. For instance in May 2007, the Fed and NCUA issued an opinion letter on retail sweep transactions that outlines strict requirements on bookkeeping, Wright said.

The deposit reclassification pricing structure through fi-linx depends on the size of the financial institution--the CUSO plans to market the service to both credit unions and banks. In the hosted version, there's an ongoing maintenance agreement. The local version, which is still in the works, has a one-time set up fee.

"We try to shoot for a three month return on investment," Wright said.

While deposit reclassification is fi-linx's flagship product, the CUSO is slowly building its product line. Last summer, it launched Check Casher, a check fraud solution program. It helps front line staff identify fraudulent checks by validating the routing number in real-time against a continuously updated list from the Federal Reserve. In addition to retrieving information such as institution name, city, state, and the Federal Reserve district, it also searches all publicly available sources online for fraud alerts. Wright said fi-linx will offer Check Casher for free to credit unions with $25 million in assets or less to help them in their efforts to fight fraud.

Penn said MaPS has saved $145,000 each year because of deposit reclassification and Check Casher.

"Credit unions have to continuously reinvent what they do. That part becomes everything we focus on. It causes us to rethink what we have been doing traditionally. This old dog can learn new tricks."

Looking ahead, Wright said they want "to keep the company as small and nimble as possible" in terms of operating expenses. The time, sweat, and funding behind the CUSO's efforts are in line with giving credit unions the tools to remain relevant.

"As competitive pressure becomes greater across the nation, credit unions must seek new, alternative methods to increase members, gain efficiencies and improve the return to member," Wright said.

--msamaad@cutimes.com