Armaguard, Australia's last remaining cash transport company, will receive a $50 million bailout from its eight largest customers, including major banks.
Rapid decline in cash
The company has been grappling with financial difficulties due to the rapid decline in cash usage.
The bailout will involve Commonwealth Bank, ANZ, Westpac, NAB, Coles, Woolworths, Bunnings and Australia Post providing monthly payments to Armaguard, an arrangement that should keep the cash transporter operational for the next 12 months while it meets efficiency and restructuring requirements.
This intervention eliminates the immediate risk of default for Armaguard, ensuring the continuation of the nation's only distributor of banknotes and coins.
The industry now has a year to develop a more sustainable system for moving money across Australia.
Armaguard's financial troubles stem from a big decrease in cash transactions, which have dropped from more than 60% in 2010 to just 13% in 2022.
This decline has made it increasingly expensive for the company to deliver smaller amounts of money to all parts of the country.
Forensic accountant called in
Starting July 1, a forensic accountant will scrutinise Armaguard's financial records to ensure compliance with the bailout conditions. The accountant will verify that the funding remains within Armaguard and does not flow to its parent company, Linfox.
Additionally, an independent pricing arrangement will be established in the future, a condition insisted upon by the eight customers to address concerns about Armaguard's monopoly in cash transport.
Armaguard's financial struggles have been ongoing, leading to approval last year from the competition watchdog to merge with its biggest rival, Spanish-owned Prosegur.
This merger granted Armaguard control of more than 90% of the market in moving cash to banks and retailers across the country.
Just months after the merger, however, Armaguard signalled that it was undergoing difficulties in maintaining the same level of service at the same price, prompting emergency talks with customers, the Reserve Bank and the federal treasury department.
We still need cash
The Australian Competition and Consumer Commission has been monitoring Armaguard's conduct, ensuring compliance with the merger conditions.
Despite the decline in cash usage, surveys from the Reserve Bank indicate that nearly one in four Australians would face significant hardship if they could not access cash, pointing to the continued need for Armaguard's services.
Australia's major financial institutions have also expressed concerns that disruptions in cash distribution could lead to hoarding of notes and coins or a rush to access cash.