Huge cash change coming to Australia as Big Four banks avert 'crisis'

Yahoo

06-02-2025

There's been a big development in how cash is handled across the country behind the scenes. Big stakeholders involved in propping up Armaguard have met this week to work out whether to renew the deal inked last year to keep the beleaguered cash-in-transit company afloat.
Part of those discussions reportedly centred around whether Westpac should continue to hold the responsibility for all the cash in Armaguard's vaults or if that should be shared across the Big Four banks. RMIT's Professor Angel Zhong told Yahoo Finance that this arrangement had been around for decades.
"It's an unusual model because it actually places significant balance sheet liability on Westpac, while at the same time, other banks benefit from the distribution network without carrying the same financial burden," she said.
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"So it's quite a reasonable push that, especially with the declining usage of cash, Westpac wants a more equitable distribution of responsibility.
"I think it also reflects the growing unease with the outdated structure around cash usage and the declining profitability of cash distribution."
Under the 20-year deal, the Reserve Bank of Australia (RBA) owns responsibility for all notes and coins it issues until it reaches Armaguard.
Once that happens, even though it's being stored by the cash-in-transit company, the liability, which is worth hundreds of millions of dollars, is on Westpac.
The Big Four bank has to manage that risk until Armaguard delivers the money to bank branches and other retailers like Coles and Woolworths around the country.
This arrangement, which is called the cash distribution agreement, will finish on July 18.Naturally, when most contracts come to an end, some stakeholders might want to see a shake-up before another deal is organised.
According to the Australian Financial Review, Westpac has been pushing for the load to be shared across itself, Commonwealth Bank (CBA), NAB and ANZ.
CBA reportedly agreed with Westpac when the Big Four met on Wednesday to discuss the looming deadline and there was "broad support" for the idea of dividing up responsibility for Australia's cash.
The finer details haven't been arranged yet but if it's fully implemented under this setup then it will help ensure notes and coins continue to be delivered to Aussies who use it.
There were concerns amongst cash advocates that if Westpac couldn't secure a new agreement with CBA, ANZ, and NAB, then it could walk away altogether, sparking a "cash delivery crisis".
Yahoo Finance has reached out to the Big Four banks, as well as the Australian Banking Association (ABA), for comment.
Last year in June, the cash-in-transit business was given a $50 million lifeline to stay afloat for 12 months.
The deal was organised by CBA, Westpac, ANZ, NAB, Coles, Woolworths, Bunnings and Australia Post.
But questions remain about whether that funding boost will be repeated this year.
Zhong told Yahoo Finance that it would be a "complex" process.
"I would say that it is more likely for an agreement of collaboration to happen, for example, major banks to collectively support Armaguard or to share the cash distribution burden," she said.
"But then again, any new agreement we also require approval from the ACCC, so it is a complex and complicated situation.
"It's important that there is a fine balance between competition concerns and also the need to maintain a critical piece of financial infrastructure."
If the Big Four don't come to the table again, the federal government could be forced to prop up Armaguard for the foreseeable future.
Back in August, the Australian Competition and Consumer Commission (ACCC) allowed the ABA, its member banks, and other participants to formulate a collective scheme to ensure businesses and communities wouldn't be without cash if Armaguard collapsed after the funding finishes in the middle of 2025.
The ACCC was initially worried about Australia's biggest financial institutions working together for a cash backup plan, however, the regulator decided to let collaboration continue under several conditions, as the availability of physical money is a big concern for many.