Another possible solution to banks having so much power is to regulate them more. I know a lot of libertarian types don't like that answer, but it is a valid answer.
It means you have far more choices in who to give your business to. For example, in a big city you can eat at thousands of restaurants. Or cook at home. However, I cannot choose from thousands of payment processors. With more payment processors competing for my business, I would get a better product and more choice.
> Another possible solution to banks having so much power is to regulate them more. I know a lot of libertarian types don't like that answer, but it is a valid answer.
I'm firmly not libertarian. Not even close. But I don't like to pull out the regulation stick until we see that more competition and a functioning market can't solve the problem. Since these transactions are now all digital, the potential for highly functioning markets has barely been explored.
Banks do know enough to price in risk. And there is your problem. They must be allowed to price in risk and if they are allowed to do that they can effectively deny business by making the price too high.
PayPal isn't a bank but does payments. The real problem is there aren't enough alternatives like that. The solution to banks having so much power is to give them more competition.