Commonwealth Bank is in advanced negotiations with Armaguard to sell a large chunk of its automated teller network.
Several banking industry sources with knowledge of the talks confirmed to Banking Day on Wednesday that the parties were close to sealing a deal that would result in Armaguard acquiring up to 300 of CBA’s non-branch ATMs.
“They have been talking for quite a while and there’s now an expectation in the banking sector that a transaction is imminent,” one of the sources told Banking Day.
The sources could not share details about the geographical location of the ATMs or the pricing of the sale.
A CBA spokesman declined to comment.
Melbourne-based Armaguard appears to be gaining an upper hand in the battle for control of Australia’s ATM market after it last month secured a deal to buy ANZ’s 1300 off-site machines.
Last year Armaguard also acquired the Rediteller network from Cuscal.
Armaguard is planning to rebrand its newly acquired ATMs under a unified moniker and charge banks for customer access to its expanded network.
Under a fee arrangement negotiated with ANZ, the bank’s customers will get free access to the Armaguard fleet for an unspecified number of years. Presumably, CBA will also seek to negotiate a similar arrangement for its customers.
If the CBA deal is consummated, the Lindsay Fox-owned cash logistics business would be the frontrunner to operate a national ATM utility because it has acquired a network of scale and geographic distribution that other independent operators could not match.
Moreover, Armaguard already has a large foot in the door of three of the major banks because it continues to provide technical maintenance and cash replenishment services for branch ATMs owned by ANZ, CBA and NAB.
NAB also is believed to be considering a sale of all or part of its off-site fleet after calling for expressions of interest from ATM monoliners earlier this year.
There’s much strategic value hanging on NAB’s decision.
Bidding for the NAB machines could be intense between Armaguard and its main rival in the domestic ATM services market, the Spanish-owned Prosegur group.
Prosegur last year acquired 750 off-site ATMs from Westpac and probably needs a larger geographic footprint to compete effectively against Armaguard.
If Prosegur was able to acquire a chunk of NAB’s fleet it would also be positioned to operate a viable ATM utility competing against Armaguard.
Such a scenario would have profound implications for Australian bank customers who have become accustomed to fee-free access to cash through most ATMs in recent years.
The reconfiguration of ATM ownership will likely result in Armaguard-aligned banks, such as ANZ, offering free access to machines operated only by Armaguard.
It is likely that ANZ customers would incur direct or “on-the-spot” fees when they withdraw cash from a Prosegur operated ATM.
There are other pricing implications for ATM users that the major banks will need to clarify.
Under its arrangement with Armaguard, ANZ says that its cardholders would continue to get free access to the 1300 machines it sold.
But it did not say how long the free service would remain in place. Westpac was also silent about the same issue.
This is a critical point because fee-free access to ATMs currently hangs on ANZ and Westpac paying fees to the ATM operators.
Consumer advocates will probably demand greater clarity from the major banks on the long term pricing implications of their ATM sales - especially in rural and remote communities where branch services have been withdrawn.
For this reason the operating agreements between the banks and the new owners of their ATMs will be of interest to the ACCC and the Reserve Bank’s Payments System Board.