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Comment by tomlin | Hacker News Reader

Proximity payment system? Banks, meet your "Napster".

Would you explain why proximity payment is like Napster to banks? My (limited) understanding of proximity payment is that it is a token that isn't very different from the magnetic strip swipe; it is still a token that resolves to a particular bank account through a payment processing network.

Sorry for my rather brief thought. Here it is explained:

Napster changed the music industry forever and caused the music industry to (at least to some extent) change.

My thought is that proximity payments + API for banking system (ie: PayPal or Google equivalent) would shake things up for the banking industry.

In other words, if you could completely bypass the big banks - while they struggle to implement 10 year old payment system technology, not to mention high service fees - you'd end up with a system that is more convenient and manageable.

My point wasn't the file sharing aspect of Napster. It was about how Napster changed an industry.

I'm not sure what you are suggesting can change. You cannot completely bypass the big banks with just proximity payments. That's where the money is. Apple can help you move your money, from your bank account, to a merchant, into their bank account, but that's just Paypal level of functionality, nothing new.

Proximity non-card payments will change the situation for the debit/credit card operators, and possibly to a degree for Paypal-like services. Big banks are here to stay, and if they change something, it'll sooner be reasonably priced wire transfers to cut out the Paypal/cheque alternatives from hell.

You're thinking of a complete overall, whereas I am thinking a gradual disposition.

To some extent, the card is where the control is. PayPal knows this, which is why they came out with a debit and credit card.

If a proximity payment service emerged that could interact with the API inside a device, it is a matter of time before a "simple, affordable microtransaction" service/app comes about. From there, exponential growth due to the order of convenience and simplicity. Banks, meet your "Napster", as it were.

Imagine mint.com came out with a proximity payment system for all devices and used the existing mint.com system as your "Bank Account" overview. Simply amazing!

If a small business already has a merchant account at their bank, and can process proximity payments via Paypal or other ways, then they can avoid the 2-3% Bank/Credit Card charge every time someone uses a credit/debit card.

It's possible that the credit card companies might get affected by this if somehow these NFC technology communicate directly with the banks, akin to the debit system. But that's an unlikely scenario, credit cards and their reward system gives incentive to people to use their credit cards.

Rewards programs are not what keep competitors to Visa at bay, network ubiquity is.

Phones will replace credit cards.

I have a friend who works in IT for a fast food chain. They are gearing up for the iPhone5 among others. Drivers will be able to place their order on the highway for the next franchise location. When they arrive, they waive their phone at the proximity payment box and collect their food. The phone acts as both a payment method and a loyalty card with user history data down to the 'no mayo on the fish sandwich.'

More than banks its the credit card companies that could get short circuited. If itunes gives an option to associate a bank account with the account then you can pay direct to vendors and split the merchant fees with the place youre buying things.

Indeed. I would love to get my paycheque via a proximity transaction on my smartphone.

(Yes, that is sarcasm.)

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