Armourguard Logistics, the only supplier of cash handling and logistics in New Zealand, is crying foul over an effort by the country’s big banks to collectively negotiate the price they pay for services.
The dispute centres on a service called “cash-in-transit” which entails the delivery of cash to banks and other businesses and entities around the country.
Last month, the New Zealand Banking Association (NZBA) asked the Commerce Commission for special authorisation for banks to work together and negotiate collectively with Armourguard to fix a new 10-year contract for service, and to make interim arrangements.
Speaking to the Herald, Armourguard CEO Shane O’Halloran cast the banks’ request as anti-competitive behaviour aimed at pushing down prices, which he said have been unsustainably low for years.
O’Halloran said Armourguard wants to shift to a new pricing model whereby the country’s big banks would pay a “kind of utility model” basic infrastructure fee to ensure cash services are available to all customers across the country.
He said the allowable cost would be set by a third party such as the independent economic consultancy NZIER.
The NZBA’s request for dispensation to negotiate as a group is an effort to push back on this plan.
If Armourguard gets its way, the lion’s share of the cash infrastructure cost would be borne by ANZ, Westpac, ASB, BNZ, and, to a lesser extent, Kiwibank (the cost would be apportioned based on banks’ net assets).
The effect would be that Armourguard’s smaller cash customers would effectively be subsidised by its largest.
All Armourguard customers including banks, independent ATM providers and merchants would also pay a “rate card” fee for service.
O’Halloran said the largest banks should be substantially liable for the basic infrastructure cost of keeping cash in the system because they are key beneficiaries and gain the most from retaining a healthy system for cash distribution, and because they have deep pockets and can afford it.
The infrastructure cost covers the likes of basic labour expenses, vans and machinery, O’Halloran said.
He said that if the company was to spread all of its costs more equally across customers it would have the effect of driving a significant number away from accepting cash, which, in turn, would exacerbate a problem of shrinking cash use.
NZBA chief executive Roger Beaumont cast the circumstances differently. In an emailed statement he pointed out that Armourguard is a monopoly provider of full suite cash-in-transit services.
“This means there’s no competition to keep Armourguard’s prices or service standards in check,” Beaumont said.
“If we continue as we are now, the likely result will be reduced reliability, slower response times, and a general decline in the overall quality of cash-in-transit services – posing a real risk to the future viability and reliability of this service. That’s why we’ve approached the Commerce Commission.
“If cash-in-transit customers can work together to negotiate with Armourguard, we have a better chance of making sure cash is available to people who want it.”
The backdrop to the dispute is a heavy decline in the use of cash in New Zealand and falling demand for cash-in-transit services. The trend accelerated during the Covid-19 pandemic, and has also been exacerbated by a decline in the number of bank branches and ATMs.
Continued widespread acceptance of cash across businesses is generally viewed as a public good, and especially beneficial for the poor and the elderly.
Currently businesses, including retailers, are not required to accept cash payment for goods and services, so long as customers are clearly informed (for example through signage) before they begin shopping.
Retail NZ CEO Carolyn Young said her organisation expects to make a submission to the Commerce Commission on the NZBA application, but is still consulting its members and forming a view.
Cash-in-transit services include the wholesale service of moving cash between the Reserve Bank of New Zealand and the commercial banks and between commercial banks.
It also encompasses so-called retail cash supply to merchants and independent ATM operators (including maintaining and managing machines).
Both the retail and wholesale services entail guard services.
Last year Armourguard, ultimately owned by US-based Evergreen International NZ, bought its main rival, ACM.
The move, which leaves Armourguard as a monopoly, was sanctioned by the Commerce Commission. It found that, in light of “significant cash losses” by both Evergreen and ACM, it was unlikely that both would continue in business without the merger.
Evergreen Holdings NZ made a net loss of $6.25m in 2024, and it made a $1.24m net profit the previous year, according to its financial disclosures.
The Commerce Commission authorisation would allow the banks to engage in practices that might otherwise be considered “restrictive trade practices” and against the Commerce Act.
Such authorisations can be given if there is deemed to be an over-riding public benefit.
Armourguard opposes the authorisation.
The commission has set out preliminary findings, and a draft determination will be published before any final decision. This will be open for submissions.
The NZBA has asked that its application be treated with urgency. The commission is scheduled to decide the matter by March 25 next year.
Kate MacNamara is a South Island-based journalist with a focus on policy, public spending and investigations. She spent a decade at the Canadian Broadcasting Corporation before moving to New Zealand. She joined the Herald in 2020.