Yahoo Finance Armaguard's major $50 million deal delays cashless revolution in Australia
The cash injection will be funded by CBA, Westpac, ANZ, NAB, Coles, Woolworths, Bunnings and Australia Post.
Cash transport distributor Armaguard has secured a $50 million deal with the big banks, supermarkets and major retailers. The agreement will ensure cash continues flowing through the economy for at least another year.
The new agreement will be funded by Armaguard’s biggest customers, Commonwealth Bank, Westpac, NAB, ANZ, Coles, Woolworths, Bunnings and Australia Post. It comes three months after the struggling company rejected a $26 million lifeline from the businesses and instead secured funding from its parent company, Lindsay Fox-owned transport and logistics giant Linfox.
The new agreement, which was led by the Australian Banking Association (ABA), will provide funding for a year from July 1. It was submitted to the competition regulator for approval today.
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The funding will be contingent 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.
ABA CEO Anna Bligh said the deal would "keep cash moving around the country and ensure it remains available to Australians wherever they live".
“The 12-months of financial support also gives Armaguard the necessary time to restructure the business and realise the benefits from their merger with Prosegur," Bligh said.
"It also allows all parties to work through possible long-term solutions for sustainable cash access into the future."
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Despite a merger with former rival Prosegur last year and a near monopoly of the market, Armaguard has struggled to stay afloat due to a drop in cash transactions, which reduced demand for cash deliveries.
Cash dropped from 62 per cent of total payments in 2010 to just 13 per cent in 2021, according to the Reserve Bank.
Linfox Armaguard executive chairman Peter Fox said this was "not a contest between the parties" and there was "no winners and losers".
"No other nation has major banks, retailers and key distribution companies working together to achieve a more efficient Cash-in-Transit industry," Fox said.
"Armaguard is also leveraging the expertise of its other shareholder, Prosegur, which is one of the world’s leading cash companies."
'Welcome relief' for 1,400 workers
The Transport Workers Union (TWU) has welcomed the deal and said around 1,400 workers employed by Armaguard to move cash around the country had suffered from uncertainty over recent months.
“This deal is a welcome relief to our members who have faced months of uncertainty and troubling headlines about the future of their employer,” TWU national assistant secretary Emily McMillan said.
The union called on "wealthy banks and retailers" to ensure the long-term viability of cash-in-transit operations.
“Regional communities and many in society still rely on cash transactions," McMillan said.
Cashless concerns
It comes as Australia continues to move towards becoming a cashless society, with some experts tipping the country will become "functionally cashless" by 2030 as people opt for card over cash.
“This increasing preference to use cashless payments is pushing businesses like Armaguard out,” RMIT associate professor of finance Dr Angel Zhong told Yahoo Finance.
“It will then further increase the cost of using cash for both business and consumers, and that will further accelerate this transition to a cashless society.”
In a bid to keep cash in circulation, independent MPs Andrew Gee and Bob Katter have introduced a new bill to parliament that could see businesses face hefty fines of up to $25,000 if they don't accept or carry cash.
Baby Boomers, regional Australians and lower-income households are the most worried about the cashless move, research has found.
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