[simonsez]

I think the point re: credit cards is that PayPal has actually been able to create an alternative payment system that lives outside the banking system - I think PayPal itself is a bank (am I wrong?) in that they take your deposits when you leave your money in your account.

I agree that there is no getting around the banking system completely (unless you rely in cash somehow), but theoretically you could enable another way to move money from one bank account to another without charging 20%+ interest rates and exorbitant late fees, no?

[yummyfajitas]

...but theoretically you could enable another way to move money from one bank account to another without charging 20%+ interest rates and exorbitant late fees, no?

Like a debit card, a wire transfer or a check? Or like setting up online bill pay to pay off your credit card in full every month?

[simonsez]

Right, so all of those work now through the existing financial system, but they take a long time to clear (I believe ACH is several days).

I imagine a startup (would it have to be a bank? I'm not sure) could build something where the transfer is semi-instantaneous and disperse the risk among it's other customers somehow in a more equitable manner (perhaps charging a fee?). It might, of course, be difficult to compete against the credit card, which seems free to most consumers (but is subsidized by the merchants and those borrowers who don't pay in full)