#1 Don’t grant your friend the assumption that we must approach the Bible first and only for what the Christian Faith is. Ask him how Christ wanted us to know the Christian Faith. He won’t be able to find any reference to Jesus founding a Bible. The Church was founded by Christ to teach the truth. The Tradition of the Faith, including the sacraments, preceded the Bible.
#2 The Church that gave your friend the Bible is the same Church that had priests and confession — and well before the New Testament canon was settled. Why does he accept the Catholic Church’s authority to settle Scripture, but not the Catholic Church’s teaching on the sacraments?
#3 Even if the story re: Simon the Magician went down how your friend said it did, so what? Catholics don’t say private confession to a priest is the only way God forgives us: Catholics don’t confess their sins to a priest as opposed to confessing to God. No, we confess our sins directly to Christ all the time, in private prayer, examination of conscience, in every Lord’s Prayer, at Mass, etc. Confession is a sacrament: a gift that God gives us so we have a visible expression of a spiritual reality, i.e., we truly ARE forgiven when we hear the priest’s absolution.
#4 The New Testament commands us to confess our sins to others, and it puts Priests right in the middle of it:
James 5:14-16: Is anyone among you sick? Let them call the elders of the church to pray over them and anoint them with oil in the name of the Lord. And the prayer offered in faith will make the sick person well; the Lord will raise them up. If they have sinned, they will be forgiven. Therefore confess your sins to each other and pray for each other so that you may be healed. The prayer of a righteous person is powerful and effective.
(The elders are priests. The Greek Presbyteros – meaning “elder” – was transliterated into English as “Priest.”)
This passage is clear: The ministers of the Church are used as vehicles of God’s healing and grace.
#5: Ask him if he is aware of all the ancient Christian traditions that are in existence today, and ask him if he knows what they believe about John 20 and Confession. Your friend probably doesn’t know much about the Eastern Orthodox, the Oriental Orthodox, and the Assyrian Church of the East. If he does, then that means he thinks he knows better than 2,000 years of Christian history.
All these ancient traditions – including the Catholic Church – have Confession and a priesthood: The Roman, the Byzantine, the Syriac, the Coptic, the Syro-Malabar, the Chaldean.
Ask him why he prefers a novel interpretation over ancient and universal Christian teaching and practice.
Others who reply to your question will more directly answer re: John 20 itself, but all these other points are important to bring up as well.