In this article, we analyze the U.S. community banking sector-a sector populated by small firms that hold a shinking share of an increasingly competitive and technology-based financial services industry-but we rely on an atypical approach to perform the analysis. We use numerous first-hand observations made by individual community bankers, collected during a Federal Reserve survey in August 2001, to complement the usual data-intensive industry analysis. Although the survey itself was an effort to learn about the evolving payments services needs of community banks, the surveyed bankers also made wide-ranging observations on a variety of other topics, including the fundamental mission of community banks; the threats and opportunities posed by large banks; perceptions that the playing field is not always level; and the growing tension between traditional high-touch relationship banking and potentially more efficient high-tech banking. The past decade has witnessed tremendous changes in how banks are regulated, how they use technology to produce financial services, and how they compete with each other. These transformations have important consequences for the typical community bank, for the community banking sector as a whole, and by extension for the households and small businesses that purchase financial services from community banks.
