How Payments Gaps Are Limiting Deposit Growth at Community Banks

Community banks have made meaningful progress in digitizing account opening, but the competitive battleground for deposits is shifting. Opening and even funding accounts are no longer enough to secure lasting relationships. The defining factor is what happens next: whether those accounts become central to everyday financial activity.

That is where many institutions are falling short. While 55% of community-bank decision-makers say they have fully modernized their technology stacks, payments capabilities tell a more complicated story. Investment in real-time payments infrastructure is widely recognized as critical, yet many institutions have not fully implemented these capabilities.

This gap has direct implications for deposit growth. Accounts that are opened and funded do not automatically become primary relationships. Many remain underused or dormant, limiting opportunities to retain deposits and deepen engagement. The issue is no longer just activation—it is utilization.

Legacy infrastructure, including core provider limitations, plays a key role in this disconnect. Many systems still rely on batch-based processing and fragmented payment capabilities, making it difficult to support seamless experiences across use cases such as peer-to-peer transfers, bill payments and business disbursements. At the same time, concerns about fraud continue to slow adoption, with 26% of community banks citing it as a barrier to implementing faster payment capabilities.

To close this gap, community banks are increasingly adopting a payments-layering strategy. This includes embedding capabilities such as instant payments, P2P transfers and multi-rail disbursements directly into funded accounts. This shift reflects a broader reality: Accounts become primary only when they support the full range of everyday financial activity.

The opportunity is significant. More than 70% of small to mid-sized businesses (SMBs) say they would prefer to bank with community institutions, yet far fewer currently do—pointing to unmet demand that stronger payment capabilities could unlock.

The path forward is increasingly clear. Deposit growth depends not just on opening or funding accounts, but on enabling continuous payment activity. By aligning payment capabilities with everyday account usage, community banks can strengthen engagement and better position themselves to compete for deposits.

Download the Tracker From Opening to Ongoing: How Modern Payments Unlock Community Banks’ Deposit Growth

About “From Opening to Ongoing: How Modern Payments Unlock Community Banks’ Deposit Growth”

The latest “Money Mobility Tracker®,” a collaboration with Ingo Payments, examines why funded accounts at community banks often fail to become primary relationships, how gaps in payments functionality limit utilization, and why enabling everyday money movement is critical to deposit growth.