Armaguard are on the cusp of an epic win over their alarmed clients in the banking industry via a material support package.
Talk in the industry is that negotiations between the Australian Banking Association and Armaguard will be wrapped up by the end of this week. Maybe sooner.
Linfox Armaguard is on the cusp of extracting around $100 million to $110 million in financial support from major banks, Australia Post and others to prop up the company’s near-monopoly business in cash-in-transit.
Granted authorisation by the ACCC only nine months ago to roll up Prosegur - Armaguard’s only real competitor in the CIT business - Armaguard has spent most of the time since crying poor, and walking away from its own financial projections used to convince the ACCC to greenlight this merger.
Armaguard has even gone so far as to assert that it was heading for insolvency.
As events have transpired, the rights and wrongs of this head-scratching solvency claim have been overtaken by the industry’s unease that the economics of the business of cash distribution, if allowed to drift, may result in the decay of current service standards.
This could only amplify reputation issues amid ongoing and widespread closures of bank branches around Australia.
While demand for cash is evidently in decline, this contrasts with an enduring popularity (or alternatively nostalgia) for the maintenance of cash as a mass market payment option.
In any event, as Banking Day reported on Thursday, via the ABA the industry has hammered out an agreement to support Armaguard’s business in the form of materially higher prices.
Given universal industry support for this intervention, it appears inevitable that the ACCC will be persuaded to yield to Armaguard’s demands that a host of conditions on pricing and conduct imposed only nine months ago be removed or watered down.
The bulk of this financial support will be shouldered by the four major banks, with most of the industry excused from supporting what will be reported by most media as a ‘bailout’. Which it is.