Why Community Bank Accounts Must Pass the ‘Everyday Test’

There’s no shortage of issues testing community banks these days. Managing real-time payments, attracting Gen Z and integrating AI are just a few. But there’s one test community banks might have pushed down on the list. It’s the “everyday test” and it’s the central issue facing community banks today.

Here’s how the everyday test works, because a bank account isn’t really a primary account until it passes this test: the customer’s paycheck lands there, the account pays the rent and the utilities and the subscriptions, the debit card swipes at the grocery store and money moves in and out of it as easily as it moves in and out of a phone wallet.

An account that fails this test, even one that’s been opened and initially funded, ends up as a dormant placeholder, holding one stale deposit and generating no real engagement. The industry has largely solved digital account opening and even initial funding; what it hasn’t solved is account activation, getting the account to become the one a customer actually uses every day.

A simple technology solution is only part of the answer. New PYMNTS Intelligence research found that 55% of community bank decision-makers say they’ve fully modernized their technology stacks, yet many of the accounts these banks open fail to become primary relationships. However, many community banks, while confident in their modernization efforts, lack the payments capabilities needed to support continuous engagement. This gap between perceived readiness and actual payments functionality is emerging as a key constraint on growth after funding. In this environment, payments are not just a feature of the account; they are what determine whether the account achieves primacy with any new customer.

Three ingredients have to line up for an account to pass the everyday test.

One: The first is that income has to go in. The single biggest signal that an account has passed the test is that the customer’s paycheck or gig income is deposited directly to it. Once direct deposit is set up, the customer reorganizes the rest of their financial life around that account, such as bill pay, automated transfers and debit card activity, because that’s where the money lives. Without direct deposit, the customer has to manually push money in, and the account becomes an afterthought.

PYMNTS Intelligence data shows consumer use of instant payments for income surged from 15% in 2020 to roughly 45% by May 2025, and the workforce is increasingly nontraditional: about 1 in 3 millennials and nearly half of Gen Z consumers earn core income from gig work, tips or selling products online. If a bank can’t receive that income smoothly, ideally instantly, it loses the primary relationship before it ever has one.

Second: Money also has to come out easily, and this is the piece most often underestimated. Consumers now hold multiple accounts across banks, neobanks, P2P apps and wallets, and they route their funds to whichever one moves money most easily. PYMNTS Intelligence research found that nearly 6 in 10 recipients who try instant disbursements once make it their preferred way to receive money going forward.

An account that feels like a vault with slow check holds — no Zelle, no instant external transfer and added friction on debit card use — won’t be the one people choose to fund, because they correctly sense that getting money back out will be harder than at their primary bank. The Federal Reserve’s Survey of Household Economics and Decisionmaking (SHED) reinforces this. Among consumers with a bank account, 17% are underbanked, and 15% of those have problems accessing funds in their accounts, compared to only 5% of fully banked consumers. Access friction is itself a deposit driver, in the negative direction.

Third: Everyday spending has to happen. Paycheck in, rent and card swipes out, Zelle to a friend on the weekend, this pattern is what creates the balance stability and the interchange revenue that makes a retail deposit relationship economical. An account without this pattern is paying acquisition cost with nothing to offset it.

Account Opening Is Key

People open community bank accounts for a specific reason. They range from a local CD rate, a mortgage or small-business loan relationship, a family referral or technology features. According to PYMNTS Intelligence’s most recent survey of community banks and credit unions, across the suite of tools and features offered by community banks, some features like mobile banking (100%), online banking (99%) and call center support (96%) are table stakes. Card transaction management, planning and budgeting tools, biometric authentication and mobile wallets all sit at or above 84% adoption. These figures reflect sustained, deliberate investment in the capabilities that members have historically ranked as essential.

Small and medium-sized businesses (SMBs) have different reasons. PYMNTS Intelligence finds 38% of SMB members are at least slightly likely to leave their credit unions within the next year, signaling a meaningful pool of at-risk relationships. It also found 70% of SMBs that switched institutions prefer digital onboarding, showing how central self-service and speed have become in winning new business accounts.

Many community banks still run on batch-based cores with fragmented payments capabilities. Only 24% of community banks currently receive FedNow instant payments, and just 9% send them, according to the 2024 CSBS Annual Survey of Community Banks, though another 44% plan to add receive capability within a year. Without instant receive, the bank can’t credibly land a customer’s gig income or same-day tips. Without instant send or modern P2P, the bank can’t be the account a customer uses to pay a friend or push funds to a brokerage.

In this scenario, both ends of the everyday test get weaker at once.

Regulatory Friction

Regulations add another layer of friction at exactly the wrong moment. Under the Expedited Funds Availability Act, banks may legally hold checks deposited into accounts opened in the last 30 days for up to seven to nine business days, and may extend holds on large deposits (over $6,725) or checks of doubtful collectability. From a safety-and-soundness standpoint this is entirely reasonable. From the customer’s standpoint, during exactly the window where the account is being evaluated as a potential primary relationship, the money “isn’t really there,” which pushes the customer back to the account that works on Day 1.

The everyday test is also a funding-cost problem. The Federal Reserve Bank of Kansas City (April 2024) found that community banks are more vulnerable to deposit outflows than larger institutions because they are more dependent on deposit funding and have limited access to broader wholesale funding markets.

Since the Federal Open Market Committee’s 2022 rate hikes, community banks have had to shift toward longer-maturity time deposits and borrowings from the Fed’s discount window and Bank Term Funding Program. All of these are more expensive and less stable than core transaction deposits. The 2024 CSBS Annual Survey reported that 59% of community bankers ranked the cost of deposits as inflation’s single most impactful effect on their bank. FDIC Quarterly Banking Profile data through Q4 2025 shows domestic deposits rising for six consecutive quarters, with community-bank domestic deposits up roughly 5% year-over-year as of Q2 2025, a meaningful improvement.

But community bank net interest margin in Q1 2025 (3.46%) remained below the pre-pandemic average of 3.63%, meaning the cost of holding deposits is still pressing on earnings. Every account that fails the everyday test is acquisition cost without offsetting revenue, and it forces the bank to replace that lending capacity with pricier wholesale funding. For an industry that originates roughly 35% of U.S. small-business loans and 70% of agricultural loans (FDIC), that is not a trivial margin issue.

Banks don’t fail the everyday test out of carelessness. They fail it because the safeguards that prevent loss also create the friction that kills engagement.

New-account fraud, first-party fraud, synthetic identity fraud, check kiting and money-mule recruitment all show up disproportionately in freshly opened accounts. PYMNTS Intelligence found that 26% of community banks cite fraud concerns as the primary barrier to implementing faster-payments capabilities. The same real-time rails that would let a customer instantly receive their paycheck and push funds to Venmo also give a fraudster a way to drain an account before a bad deposit can be clawed back. Holds, deposit limits and funding-source restrictions exist precisely because of this tension, and they also suppress the activity the bank needs.

Passing the Test

The everyday test requires holding both sides at once: modern payment rails on the front end, paired with smart, layered fraud controls including device intelligence, identity verification, consortium data and behavior monitoring that don’t impose blanket friction on legitimate customers.

The emerging playbook for community banks centers on making every part of the everyday test work.

On the money in/account funding side, banks are prioritizing FedNow and RTP receive capability, integrating with gig platforms and payroll providers, and proactively prompting direct-deposit switches at account opening rather than leaving customers to set it up themselves.

On the money-out side, they’re embedding Zelle and P2P, enabling instant external transfers, and tightening ACH and card-network experiences so that money moves out of the account as fluidly as out of a neobank wallet.

On the everyday activity side, they’re leaning into debit card incentives, relationship-tiered rewards, and cross-sell from existing loan or CD relationships into checking, converting a single-product customer into a full one.

Where internal technology investment isn’t feasible, FinTech partnerships close the gap. Firms such as Ingo Payments (which acquired Deposits Inc. in late 2024), Jack Henry and deposit-aggregation services plug modern money-movement rails onto legacy cores without requiring a full re-platforming project.

The community bank deposit challenge is really a test-passing challenge. An account that receives income, moves money out easily and supports everyday spending will get funded, stay funded and generate stable deposits at a reasonable cost.

An account that fails any one of those three requirements will drift into dormancy no matter how elegant the onboarding experience was. Rebuilding deposit growth at community banks means rebuilding the everyday test, end to end.