Generative AI is making big banks so much faster that small-town banks are falling twice as far behind as they were two years ago.
March 16, 2026
Original Paper
Three-Speed Banking Architecture Within Community Banks:,Stochastic Frontier Analysis of Cost Efficiency Divergence, 2015–2024
SSRN · 6418313
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The Takeaway
While many hoped AI would level the playing field for small businesses, this data shows the smallest banks are actually becoming less efficient while larger institutions pull further ahead by successfully absorbing the technology.
From the abstract
his paper extends the three-speed banking architecture framework to the interior of the community banking sector, testing whether technology-driven efficiency divergence previously documented between megabanks and mission-constrained institutions replicates within the $10 million–$10 billion asset tier. The analysis employs a stochastic frontier analysis (SFA) framework with a half-normal inefficiency distribution, estimated by maximum likelihood on an unbalanced panel of 50,804 FDIC institution