Apple, meanwhile, is benefiting from the decline of cash, also sped up by COVID-19. Payments on digital wallets have nearly doubled in the past year, according to CBA (Apple does not publish its own figures on the matter). Phones are slowly displacing plastic cards, and CBA believes these digital wallet payments will become the most popular form of contactless payment by the end of this year.

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Third, both Apple and Afterpay are competing with banks in ways that fall outside banking regulation, and all the costs that come with it. Afterpay has set itself up in a way that it skirts both payment regulation and responsible lending laws, while Apple doesn’t actually handle deposits, but clips the ticket on credit and debit card transactions that occur through its platform.

In short, both CBA’s strained relations with Apple and Afterpay’s record takeover demonstrate the threat to banks from digital disruption is not some abstract risk. It is starting to happen here and now.

The banks probably won’t win much sympathy, and the wave of competition against these highly profitable institutions is generally good news for customers, if not bank investors. And so far, the revenue being pinched by Apple Pay and Afterpay is fairly small beer compared to the massive businesses of the big four.

But the more important point is that Apple, Afterpay and many others like them are challenging the lucrative relationships banks have with customers.

Evans and Partners analyst Matthew Wilson, for example, says Afterpay’s takeover shows two payment disrupters coming together as part of a war for engagement with customers. Wilson likens the competitive threat to “old world” retail banks to the fable of the frog in a saucepan of cold water that gradually heats up until it’s too late.

“The major banks have been left extremely vulnerable: akin to boiling a frog,” Wilson says.

How banks respond will be critical, and there are some big differences in strategy emerging between the major players.

CBA’s Comyn has been the most aggressive in hitting back against the technology-based rivals, whether that is by publicly lobbying for Apple and Afterpay to be regulated, or through CBA’s digital strategy.

Comyn has made it clear he wants CBA - which is particularly strong with the young - to embed itself more deeply in the financial lives of millions of customers through its app.

This month the bank will launch its own buy now, pay later service to take on Afterpay directly, and it has also formed partnerships with an online retail platform, energy retailer and a telco firm. The aim is to have CBA customers stay in its “ecosystem,” and therefore remain lucrative customers.

Westpac has taken a starkly different approach by opening the door to Afterpay. In October it will launch Afterpay-branded bank accounts that sit on Westpac’s balance sheet, as it dabbles in renting out its infrastructure, a business known as “banking as a service.”

The move has attracted some criticism in the market, with Jefferies analyst Brian Johnson calling it an “unambiguous negative” for Westpac and the wider industry. What happens to the partnership with Afterpay if the Square deal closes remains to be seen.

Whichever strategy is right, it is becoming increasingly clear that the major banks have a fight on their hands, and the threat is coming from both fintechs and “big tech” players such as Apple.

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