Major cash win for Aussies if Armaguard fails: 'Still strong demand'

Australia's competition watchdog will allow the country's banks and other stakeholders to collaborate and create a backup plan if Armaguard fails. The cash-in-transit business was saved from going under after a $50 million deal cemented its future for the next year.

But once that deal is over, it's unclear how much longer Armaguard will survive as Australia increasingly relies on cashless payments. The Australian Competition and Consumer Commission (ACCC) has granted the Australian Banking Association (ABA), its member banks, and other industry participants to formulate a collective scheme to ensure businesses and communities aren't without cash if Armaguard collapses or its services are disrupted.

RMIT associate professor of finance Dr Angel Zhong told Yahoo Finance this is a huge step for people worried about cash being phased out.

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"[The draft determination] aims to balance consumer demands moving towards a cashless society and the protection of the financial wellbeing of all Australians and the protection of financial wellbeing and the financial inclusion of all Australians," she said.

"Let's not forget that in regional Australia, as well as the older age group of Australians, there is still a strong demand for cash.

"So this business continuity planning provides assurance to the vulnerable groups that cash will still continue to play a very important role in how we approach our payments."

The ACCC conducted an investigation to see whether it would be a threat to competition if Australia's biggest financial institutions worked together for a cash backup plan.

However, the regulator has allowed the collaboration to continue with several conditions.

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“It is important that the parties continue their discussions so they can resolve or avoid potential impacts to businesses and consumers across Australia should there be any disruption to Armaguard’s services,” ACCC deputy chair Mick Keogh said.

“We have included conditions on the interim authorisation to ensure the ABA provides regular reports to the ACCC about the discussions and consultation undertaken with industry participants across Australia, including those who are not involved in the Reserve Bank working groups.

“We will carefully review those reports to ensure the interest of all communities in Australia, particularly those in regional and remote areas, are being considered before we make a final determination.”

As part of the conditions, the ABA has to provide the ACCC with a monthly report that outlines how the business continuity planning is proceeding.

The ABA has also been instructed to have an external lawyer with expertise in competition law to ensure all cash backup plans don't infringe on current laws.

The ACCC has opened up public consultation on the interim decision until August 15 and it will make its final ruling on the matter next month.

How long will Armaguard survive?

The cash-in-transit business, which controls around 90 per cent of the cash-in-transit market, has been struggling as Aussies rapidly take up digital forms of payment.

In 2007, around 70 per cent of consumer payments were made using cash, according to the Reserve Bank of Australia. But that figure plunged to just 13 per cent by 2022.

Despite Armaguard's merger with main competitor Prosegur last year, it wasn't enough to save it from solvency issues. The business initially rejected a $26 million lifeline before accepting one that was nearly double in value just months later.

The new $50 million agreement will be funded by Armaguard’s biggest customers, Commonwealth Bank, Westpac, NAB, ANZ, Coles, Woolworths, Bunnings and Australia Post and will last until July 1 next year.

The funding will be dependent on Armaguard "meeting monthly key performance indicators and other conditions". It also includes a commitment by the parties to work together to develop an independent pricing mechanism.

The ACCC has granted an interim approval of the financial aspects of the deal.

“We consider that the financial assistance to Armaguard increases the likelihood of a more sustainable supply of wholesale cash distribution services as well as access to cash by businesses and members of the public across Australia," Keogh said.

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