Big cash win for Aussies if Armaguard fails: ‘Still strong demand’

Australia’s competition agency will allow national banks and other stakeholders to work together to create a backup plan if Armaguard fails. The money transfer business was saved from bankruptcy after a $50 million deal sealed its future next year.

But once that deal ends, it’s unclear how long Armaguard will survive as Australia continues to rely on cashless payments. The Australian Competition and Consumer Commission (ACCC) has tasked the Australian Banking Association (ABA), its member banks, and other industry stakeholders to develop a joint strategy to ensure businesses and the public are not left without money if Armaguard goes bust or services its are interrupted. .

RMIT associate professor of finance Dr Angel Zhong said Yahoo Finance this is a big step for people who are worried about withdrawal of money.

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“[The draft determination] aims to balance the needs of consumers towards a cashless society with the protection of the financial health of all Australians and the protection of the financial well-being and financial inclusion of all Australians,” he said so.

“Let’s not forget that in the Australian environment, as well as the older Australian population, there is still a strong need for capital.

“So this business continuity plan provides assurance to vulnerable groups that cash will continue to play an important role in how we make payments.”

The ACCC investigated whether it would be a threat to competition if Australia’s major financial institutions worked together for a savings scheme.

However, the regulator has allowed the partnership to go ahead on several conditions.

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“It is important that the parties continue their discussions in order to resolve or avoid the potential impact on businesses and consumers across Australia should there be any disruption to Armaguard’s services,” said the deputy ACCC chairman Mick Keogh.

“We have included interim consent provisions to ensure that the ABA provides regular reports to the ACCC about discussions and consultations held with industry stakeholders across Australia, including those not involved in the Reserve Bank’s working groups.

“We will carefully review these reports to ensure that the interests of all Australian communities, particularly those in outlying and remote areas, are being considered before making a final decision.”

As part of the standard, the ABA must provide the ACCC with a monthly report detailing how the business plan is progressing.

The ABA is also mandated to retain an outside attorney with expertise in competition law to ensure that all cash backup plans do not violate current laws.

The ACCC has opened a public consultation on the interim decision until 15 August and will make its final decision on the matter next month.

How long will Armaguard survive?

The money transfer business, which controls about 90 per cent of the transport market, is struggling as Aussies quickly adopt digital payment methods.

In 2007, about 70 percent of consumer payments were made in cash, according to the Reserve Bank of Australia. But that number drops to just 13 percent by 2022.

Although Armaguard met the main competitor in Prosegur last year, it was not enough to save it from the issues of solving problems. The business initially rejected a $26 million lifestyle offer before accepting one that was nearly double the value a few months later.

The new $50 million deal will be funded by major customers Armaguard, Commonwealth Bank, Westpac, NAB, ANZ, Coles, Woolworths, Bunnings and Australia Post and will last until July 1 next year .

The funding will depend on Armaguard “meeting monthly milestones and other conditions”. It also includes a commitment by the parties to work together to create an independent pricing system.

The ACCC granted provisional approval of the financial aspects of the deal.

“We believe that the funding to Armaguard increases the opportunities for a sustainable supply of cash distribution services as well as access to cash by businesses and members of the public across Australia,” Keogh said.

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