Major Stakeholders Bail Out Armaguard Amid Declining Cash Use
Australia’s Big Four banks and leading retailers have collectively agreed to provide a further $25 million support package to Armaguard, a crucial cash transit company. This funding extension is set to keep the firm operational until the end of the year, following a substantial $50 million lifeline granted the previous year as cash transactions continued to decline sharply, leading to heightened delivery costs for cash movements nationwide.
Key stakeholders involved in this agreement include the Commonwealth Bank, Westpac, NAB, ANZ, as well as major retailers like Coles, Woolworths, Bunnings, and Australia Post. This development is anticipated to be publicly announced shortly, as confirmed by various sources engaged in the discussions.
The Australian Banking Association (ABA) indicated that this funding would facilitate the ongoing development of an independent pricing mechanism aimed at establishing a sustainable cash transit business model for the future. Deloitte Access Economics has been enlisted to propose a viable pricing framework, echoing methodologies employed in other critical services such as healthcare and utilities.
Furthermore, the banks have brought Barrenjoey Capital Partners on board to explore alternative funding options for Armaguard. This initiative will consider the potential benefits of bank and retailer financing for a service essential to their operations, specifically in delivering cash to branches and retail outlets across Australia.
The Australian Competition and Consumer Commission (ACCC) has permitted the collaboration between the ABA and major retailers to secure the continuity of cash-in-transit services. This authority, granted in late June, allows these entities to extend financial backing to Armaguard and to devise an independent pricing model without putting it into immediate practice.
Armaguard plays a pivotal role in the Australian cash ecosystem, managing approximately 90% of cash movements across the country. The company has attributed its financial difficulties to a significant drop in cash use. Data shows that cash transactions made up 62% of all in-person sales in 2010, but this figure plummeted to just 13% by 2022. Projections from Accenture suggest that cash may constitute a mere 4% of all transactions in Australia by 2030.
In response to the economic changes, Armaguard has been streamlining operations, simplifying its delivery routes to reduce expenses since the initial funding arrangement was established in mid-2024. The ABA has played a key role in coordinating industry responses to the challenges faced by Armaguard, a situation that intensified following the ACCC’s approval for Armaguard to acquire its primary competitor, Prosegur, in 2023.
Summary:
- The Big Four banks and major retailers are providing $25 million to support Armaguard amid declining cash usage.
- This follows a $50 million lifeline last year as cash transactions fell significantly.
- Stakeholders are working on an independent pricing mechanism to ensure long-term viability.
- Armaguard manages 90% of cash movements in Australia but faces financial strain due to reduced cash transaction volumes.
- The ACCC has approved collaboration for financial support and pricing model development for Armaguard.
The actions being taken reflect the shifting landscape of cash utilisation in Australia and highlight the industry’s response to adapt to changing consumer behaviours.
