If a report in the Margin Call column of The Australian on Friday evening is on the money, banks are investigating drastic options to develop a long run alternative to paying the elevated prices demanded by Armaguard, the near-monopoly supplier of cash distribution services.
According to the report, via the Australian Banking Association the industry has engaged McKinsey & Company to develop a business case for banks to establish and operate an industry-owned cash-in-transit provider.
Were this to eventuate, it would presumably shoulder most of the workload around cash distribution currently contracted to Armaguard.
The Margin Call columnist went on to speculate that a second feature of this study is to explore ways ‘that cash can be phased out of the economy’.
Banking Day recently argued Australian banks have been comprehensively outwitted by Linfox Armaguard, in the face of threats by the latter to downgrade services. Supposedly because Armaguard is headed for insolvency.
We may need to backtrack, since it seems there is a lot more going on.
An industry-owned common supplier is not a bad idea. It’s been tried before. Many times, including in many facets of the payments value chain.
Sometimes successfully. Sometimes not.
Usually these enterprising ventures decay, run into trouble, get neglected or get sold off.
However much this reported initiative to establish an industry-owned CIT operator makes sense, it all seems too late now.
The time to be interested in the industry structure of cash-in-transit was over the last year or two when Prosegur was for sale.
As for banks doing their bit to completely eliminate cash from society and the economy. Well, you can’t blame banks for asking the right questions and looking into other ways of doing things.