If you have ever withdrawn currency from an Australian ATM, received $20 in change at a supermarket, or delivered a check, Armaguard’s services have likely been utilized.
Armaguard, which is owned by Linfox Group, is the largest currency transport corporation in Australia and serves approximately 90% of the cash-in-transit market.
Nevertheless, the organization is experiencing financial difficulties. Recently, there has been a significant decline in the use of currency as a medium of exchange, a trend that has been further exacerbated by the pandemic. Armaguard declared last year that it would require a $190 million lifeline over the next three years to remain solvent.
The company last week declined a rescue offer of A$26 million from several of Australia’s largest banks and retailers, which would have required it to disclose its financial information. As an alternative, it elected to accept a $10 million contract from its parent company, Linfox, which will sustain it for the next few weeks.
However, the Reserve Bank is apprehensive about the company’s future.
What is the ongoing importance of “physical currency,” and what lessons can Australia learn from countries that have already implemented electronic systems?
Are you currently experiencing a cash-in-transit impasse?
The utilization of currency in Australia has experienced a significant decline over the past decade. The majority of consumers have transitioned to card payments, which are now frequently processed digitally.
Mobile devices or accessories are equipped with wallets.
Currently, the number of bank branches and ATMs in operation in Australia is significantly lower. The number of bank-owned ATMs decreased from 13,814 to 5,693 between 2017 and 2023, and the number of bank branches decreased by 37%.
The Australian Banking Association reports that cash is now utilized for approximately 13% of payments, a 57% decrease from 2017.
The secure transportation of currency across immense distances is a necessity due to the sheer scale of the Australian continent, which is already a costly endeavor. The unit cost of this process has increased in addition to the decrease in cash usage.
The Reserve Bank of Australia has delineated a concerning “cash-use cycle” that indicates that the provision of cash services in certain regional areas may become uneconomic for banks and other ATM providers if cash utilization continues to decline.
Nevertheless, Armaguard has maintained that it is continuing to experience losses that exceed its expectations, which it attributes to a structural decline in the demand for cash-in-transit services.
For the time being, Armaguard will continue to provide all cash-in-transit services, as it has accepted a $10 million lifeline from its parent company. However, it is uncertain what additional financial support it will be able to obtain from the enterprises it currently serves.
What is the necessity of currency for survival?
In the event that electronic payment systems are inactive or unavailable, the Reserve Bank of Australia (RBA) is invested in the continued use of currency by a substantial portion of the population as a means of payment and storage of wealth.
In a recent speech, RBA governor Michelle Bullock elaborated:
For these reasons, the RBA places a high priority on the community continuing to have reasonable access to cash withdrawal and deposit services.
The Reserve Bank is closely monitoring the negotiations to ensure the continued operation of Armaguard, as it has previously proposed the implementation of an industry “cooperative model.”
Private sector suppliers, such as Armaguard, would be replaced by cooperative entities established by prominent cash consumers, such as banks.
These variants are currently in use in European countries. The Link network in the United Kingdom connects nearly all of the country’s ATMs, enabling consumers to withdraw currency irrespective of their banking relationship.
In exchange for contributions from all members, Link is a non-profit organization that is owned by its members and is issued ATM credentials.
Foreign lessons acquired
Sweden, which is significantly further along this voyage than Australia, has become one of the most cashless societies in the world. However, this has resulted in a certain degree of resentment within the nation.
Recently, the Riksbank, the governor of the Swedish Central Bank, issued an appeal for urgent legislation to safeguard both notes and coins as a payment option for Swedes:
Cash is needed to avoid people suffering digital and financial exclusion.
The Riksbank argues that banks should be obligated to accept banknote and coin deposits and ensure that customers can withdraw currency from ATMs and branch locations.
Riksbank also noted in a recent report that Sweden presently has only one private company that offers a cash-in-transit service, which is a potential vulnerability.
It encouraged the Riksbank and commercial institutions in Sweden to collaborate in order to guarantee that cash could be conveyed in the event of the current system’s failure.
The imminent dissolution of currency will ultimately elicit warning signs, as Sweden serves as a significant illustration. In response to this, governments and central banks may enact legislation to guarantee the currency’s survival in accordance with public sentiment.
