Banks and Armaguard are close to receiving clearance from the ACCC for the big banks (and others) to coordinate on how best to prop up Armaguard’s cash distribution business.
An ACCC draft determination, published but not publicised on Wednesday, was a formality and never in doubt.
For more than six months now the industry and especially the Australian Banking Association have engaged with each other, the Reserve Bank and of course with Armaguard, to engineer solutions in the face of (contested) concerns around the ongoing sustainability of cash-in-transit services.
Armaguard, the ACCC said, “has insufficient self-generating funds to reinvest in the future sustainability of the wholesale cash distribution network on an ongoing basis.”
More recently this has escalated to suggestions that Armaguard faced a serious risk of insolvency, as more bank branches turn cashless and demand for cash via ATMs has ebbed and flowed.
The ACCC draft determination authorises banks and Armaguard to “reach in-principle agreement on the form and content of any urgent industry responses” needed to “secure continued access by banks, retailers, other businesses and members of the public to retail cash services.”
It will not take long now to reach these agreements.
In early December the ACCC granted interim authorisation following an application from the ABA lodged only one week before.
Over the last three months extensive negotiations and a degree of brinkmanship has produced the framework of an agreement that is rumoured to be very close to being finalised.
As Banking Day has reported over the last couple of weeks, Armaguard’s revenues will be supported in the form of materially higher prices.
This amounts to a financial support package valued in the order of $100 million or so spread over three years, with a disproportionate share of the burden borne by the big banks.
While on one side the banks are volunteering to pay higher prices for cash-in-transit services, on the other side this flies in the face of undertakings made by Linfox Armaguard at the time the ACCC cleared its takeover of rival Prosegur, establishing a near monopoly of CIT in Australia.
The undertakings, given in June 2023, required the combined Armaguard-Prosegur to continue offering cash-in-transit services to all locations that are currently serviced.
The undertaking also limited its ability to reduce service levels and raise prices for existing customers, and sets minimum terms and pricing constraints for new customers.