The billionaire versus the banks: The fight over the death of cash

Billionaire Lindsay Fox appears to be playing a dangerous game of chicken with a formidable and powerful foe – a collective of nine organisations including the big banks, the big supermarkets and Australia Post. But he is doing so from a seemingly weak negotiating position.

Fox’s ownership of Armaguard makes him the king of cash (of sorts). The trouble is cash is going the way of the dodo and Armaguard is a slow motion train wreck that’s ironically run out of money.

Lindsay Fox to the rescue. But Armaguard is not out of danger.

Now it’s collision time. And while the corporate undertakers may have been turned away, they must surely be on standby.

So dire is Armaguard’s financial position that supermarket giant Coles took a radical position this week of politely turning away Fox’s cash trucks in order that the supermarket chain can conserve the hard stuff over the next week including Easter. Coles had also put a cash out limit of $200 for customers just in case.

Coles didn’t want its cash sitting inside an Armaguard truck on Parramatta Road or the Monash Freeway in the event Fox pulled the pin and placed the company into voluntary administration.

The group of nine organisations (which includes Coles, Woolworths, Wesfarmers, Australia Post, and the four big banks and their umbrella organisation the Australian Banking Association) had given Armaguard until 3 pm on Thursday to accept the bailout package of $26 million – after which it was due to lapse.

But at the eleventh hour Fox refused the offer, deciding instead to use his own resources to ensure its cash transporting subsidiary had a pulse. Coles immediately responded by resuming services with Armaguard.

The $10 million tide-over funding provided by Fox is supposed to last until Armaguard can individually renegotiate contracts with these customers. “Armaguard rejects the timing ultimatum by the [Australian Banking Association]. Armaguard continues to operate its full suite of services and is confident that over the coming months, it will get the business onto a long term sustainable footing with appropriate support from the industry.”

Apparently, Fox wasn’t a fan of the ultimatum or its timing. The billionaire also probably didn’t take kindly to the distribution of a letter that revealed Armaguard had held “discussions with RBA where you indicated you may not be able to make payroll payments for your employees beyond 27 March 2024”.

Having sought a resolution through collective negotiation, to ward off the collapse of Armaguard, Fox has for now shifted his position to not allow the business to go broke.

While the corporate undertakers may have been turned away, they must surely be on standby.

But it’s a position that seems a long way from delivering a long-term resolution – given the uncertain future of cash in Australia.

Lust as they may for the days when cash will actually become extinct, the banks and the retailers understand it is a necessary evil – and by evil I mean a cost.

CBA boss Matt Comyn told a parliamentary inquiry late last year that continuing to support cash distribution was costing the bank $400 million a year.

But for pensioners, drug dealers and tax evaders, just about everyone has joined the 21st century by moving to a near cashless economy.

We know that in 2010 more than 60 per cent of purchases were made by cash. It is now closer to 10 per cent, with forecasts this number will halve by the end of the decade.

Bank ATMs are alarmingly close to extinction as have the number of supermarkets self-checkouts designated for cash payment. The situation in regional Australia is even more dire and in numerous instances Australia Post and the big supermarkets (if they are there) have become de facto ATMs.

Given Armaguard is the only cash transporter left of any size Fox should be in a decent negotiating position with this group of customers.

But the banks and retailers are working on other viable options – one of which is to set up their own shared utility service to replace the need for Armaguard. It’s a model that has been work-shopped in other countries, but it is a problem that is still a way from a solution.

This week ABA chief executive Anna Bligh told the AFR Banking Summit, “The utilities models that have worked in a couple of European jurisdictions are not challenged to get cash to somewhere like Thursday Island or Broome, or Alice Springs.”

“That’s the challenge for a country like Australia, so I wish I could tell you I’ve found the magic bullet to that, but it’s going to take a lot of hard thinking, and we need to stabilise the cash in transit business while we do that hard thinking.”

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