How Small Can You Go? LoRA Fine-Tuning 270M-8B Models for Merchant Information Extraction in Financial Transactions

Financial transaction processing requires extracting structured merchant information from noisy, abbreviated bank transaction strings at scale. Our current production system, a LoRA-fine-tuned LLaMA 3.1-8B, achieves 96.95% F1 on this task, but deploying 8-billion-parameter models imposes prohibitive memory, latency, and cost constraints. To identify more efficient alternatives, we conduct a deployment-focused study of 24 model variants spanning four model families: Gemma 3 (270M, 1B, 4B), Qwen 3.5 (0.8B, 2B, 4B), Aya (3.35B), and LLaMA 3.1-8B, systematically evaluating accuracy, inference throughput, training cost, and hardware behavior to assess production suitability. Our findings show that: (1) reproducing the LLaMA 3.1-8B fine-tune with a LoRA rank of 8 achieves 96.75% F1, only 0.20 points below the rank-32 baseline; (2) Qwen 3.5 4B with JSON-only prompting reaches 96.60% F1, within 0.35 points of the 8B baseline while using roughly half the parameters; (3) the 0.8B Qwen 3.5 model achieves 94.75% F1, matching models 2.5-4x larger and offering an attractive latency-accuracy trade-off; (4) chain-of-thought fine-tuning generally improves F1 by 0.3-1.8 points across most models, although Qwen 3.5 4B performs best with direct JSON-only prompting; and (5) Qwen 3.5 Think and Nothink training templates produce nearly identical results (F1 differences <0.004), indicating that explicit reasoning supervision is unnecessary for structured extraction tasks. We further deploy all 14 fine-tuned sub-8B models as Databricks Model Serving endpoints and observe that benchmark performance transfers reliably to production, with an average F1 change of only 0.8 points. Aya 3.35B, based on the Cohere2 architecture, is the sole exception, exhibiting a 3-5 point decline under serving conditions. Based on these results, we provide deployment recommendations across accuracy and latency requirements, ...