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Armaguard's biggest customers will pour up to $50 million into the troubled cash transporter to keep it afloat for the next 12 months.
The deal removes the risk of the nation's only distributor of banknotes and coins defaulting for at least a year, giving the industry time to find a more sustainable way to move money around the country.
Armaguard rejected a bail-out offer in March from major banks and retailers, concerned it required them to reveal too much commercial information.
Armaguard has blamed the rapidly declining use of cash for its financial woes, with cash purchases falling from more than 60 per cent in 2010 to just 13 per cent in 2022.
The decline makes it more expensive for Armaguard to continue to deliver smaller amounts of money to all parts of the country.
The deal will see Armaguard's eight biggest customers — Commonwealth Bank, ANZ, Westpac, NAB, Coles, Woolworths, Bunnings and Australia Post —offer monthly payments in return for Armaguard meeting efficiency and restructuring requirements, starting July 1.
A forensic accountant will scrutinise Armaguard's books, ensuring the targets are met and that the funding remains with Armaguard and not its parent company, Linfox.
Armaguard has also agreed to have an independent pricing arrangement come into force in the future, a requirement insisted upon by the eight customers, who are worried about Armaguard's monopoly of cash transport.
Relief comes after lengthy struggle
Armaguard has been in financial strife for some time. It received approval last year from the competition watchdog to merge with its biggest rival, the Spanish-owned Prosegur, after both firms said their businesses were not sustainable.
It left Armaguard with control of more than 90 per cent of the market in moving cash to banks and retailers across the country.
But just months after the merger, Armaguard flagged it was struggling to continue operating the same level of service, at the same price, while cash use continued to decline.
It has prompted months of emergency talks between Armaguard, its customers, the Reserve Bank and the federal treasury department.
The Australian Competition and Consumer Commission has been monitoring Armaguard's conduct, whilst also monitoring its actions to ensure it abides by the conditions of its merger with Prosegur.
Negotiations for the bailout were led by the Australian Banking Association (ABA), which represents the four major banks and 16 other banks around the country, and the agreement has been submitted to the ACCC for approval.
"This deal will keep cash moving around the country and ensure it remains available to Australians wherever they live," ABA CEO Anna Bligh said.
"[It] also gives Armaguard the necessary time to restructure the business and realise the benefits from their merger with Prosegur. It also allows all parties to work through possible long-term solutions for sustainable cash access into the future."
Linfox Armaguard Executive Chairman Peter Fox welcomed the agreement as a collaboration that delivered "no winners and losers."
"No other nation has major banks, retailers and key distribution companies working together to achieve a more efficient cash-in-transit industry," said Mr Fox.
The federal government had been keeping a close eye on the developments to ensure it did not escalate into a crisis of people being unable to access cash.
"This is a good outcome, it's a good thing for Australia while we work out some of these important structural issues in the market," Treasurer Jim Chalmers told parliament.
Cash still kept in some pockets
The COVID pandemic accelerated Australia's transition to a cashless economy, as has the growth in mobile wallets. Over four years to 2022, the value of transactions using mobile wallets rose from $750 million to $93 billion.
But almost all Australians still use cash occasionally, and those who use cash a lot are more likely to be older and have lower incomes.
Surveys from the Reserve Bank show that one in four Australians say they would experience genuine hardship or major inconvenience if they could not access cash.
Australia's major financial institutions have been concerned that a disruption to the distribution of cash could encourage hoarding of notes and coins, or worse, a rush to access cash