Armaguard and Prosegur say decline of cash set to accelerate

George Lekakis

Merger hopefuls Armaguard and Prosegur believe that the use of cash in the Australian economy is set to slide at an accelerating rate over the next decade, according to disclosures in their merger application to the competition regulator.

The two ATM and cash logistics rivals in July announced a merger plan to counter business challenges posed by the strategic decline of cash as a payments method in Australia.

The merger partners reveal in their application to the Australian Competition and Consumer Commission that their business plan for joining their operations is predicated on an assessment that cash usage in Australia will decline at a compounding annual rate of 5.3 per cent a year.

“Cash, as payments method, competes with other non-cash payment methods,” the merger applicants say in their application.

“The decline in the use of cash has therefore been accompanied by the uptake of other non-cash payment methods (with the exception of cheques), such as card payments and electronic payments.

“There are low, if any, barriers to making such payments at a large range of merchants while cash continues to face increasing barriers to its use.”

Data published by the Reserve Bank shows that the amount of cash withdrawn from Australian automated tellers has begun to recover in the last 12 months but remains below the level recorded in February 2020 before the Covid pandemic.

According to the RBA statistics, more than A$10 billion a month was withdrawn from ATMs in February 2020, but that tapered to $7.25 billion in August 2021.

Around $8.7 billion was extracted from the national ATM network in August this year.

The merger application also includes sensitive and market data regarding the size of ATM networks operated by the major banks and most of the country’s independent deployers.

According to a table published on page 112 of the merger application, Prosegur and Armaguard believe the NCR-owned Cardtronics business is the largest deployer of ATMs in Australia, accounting for more than one quarter of the national fleet of 23,508 machines.

The merger partners claim to operate a combined total of only 2700 machines or 11.6 per cent of the market fleet.

The recent rationalisation of fleets operated by the major banks has resulted in proprietary networks operated by NAB and ANZ contracting to under 1000 units.

However, the big regulatory hurdle facing the merger candidates is whether their entity would result in a concentration in the cash logistics market.

This issue is the focus of a letter sent by the ACCC to banks, retailers and other industry participants on Friday.

The regulator said it was considering in particular how closely Armaguard and Prosegur compete in the provision of cash-in-transit services (CIT) and whether competition from other providers will competitively constrain the merged entity.

The merger application is expected to stoke opposition from some banks and other ATM deployers that currently rely on either Armaguard or Prosegur to transport banknotes across business sites and retail points of distribution.