Is Coles going cashless?
IN the wake of last year’s inquiry into price gouging, public approval of the Coles Group has dropped. Their reputation has taken a further battering after recent headlines announcing that the supermarket chain will not be accepting cash over the Easter long weekend.
Whilst there is always room to criticise the practices of big businesses, in this case it isn’t entirely the decisionmakers at Coles who are to blame, and before we get ahead of ourselves, Coles has not said that they will not be accepting cash at all, as some reports have suggested.
In fact the key problem here is that major cash logistics company Armaguard, a subsidiary of Linfox, is facing insolvency.
This comes after the Australian Competition and Consumer Commission (ACCC) approved a merger between the two major cash distributors, Prosegur and Armaguard, last September. This merger was approved after the ACCC put tight restrictions in place for the merged companies, who control over 90% of the cash distribution network.
The ACCC determined that without the merger, neither company had a chance of remaining profitable.
It’s a bit of a mess, and there are crisis meetings happening behind the scenes to negotiate a bailout. It will likely be funded by the big 4 banks as well as Coles, Woolworths, Wesfarmers and Australia Post.
In particular, there are major concerns about the impact on regional communities of a collapsing cash distribution network.
What is happening?
In essence, cash use has declined rapidly in Australia. The Reserve Bank of Australia (RBA) estimates that in 2010 more than 60% of transactions were cash-based. By 2019 that had dropped to 32%, which then halved again by 2022.
The pandemic had a major impact, leading a number of businesses to stop accepting cash. Many of them never started accepting cash again, realising that cash was a hassle they’d rather do without.
There’s a bit of a myth that all businesses must accept cash as it is legal tender, but that isn’t the case. The RBA has committed to ensuring that cash continues to be in circulation but has made it clear that businesses can choose what payment methods they want to offer.
The upshot of this drop in cash use is that it has become very expensive to keep the system running. Armaguard is losing money, and if a deal isn’t inked before the weekend it is very likely that the company will enter into voluntary administration.
The RBA has urged those involved in the deal to finalise things urgently, as it is a matter of national importance.
Back to Coles
So, Coles Group has become very concerned about leaving its money in the hands of a company that is on the brink of going into administration. If their cash is in Armaguard trucks when that happens, it is entirely possible that they won’t get it back.
Coles has paused all cash deliveries through to 5 April, meaning that what they’ve got on hand is what they’ve got.
As a result, they have limited the amount of cash out that customers can get (currently $400, which will be dropped to $200), and have put plans in place for stores that run low on cash reserves. In this case, only card payments with be accepted.
This would obviously be a blow to those who rely on cash to make purchases, largely older people and those on a low income.
That said, it is entirely possible that the bailout deal will be negotiated before the weekend. An offer has been made on behalf of several major banks and retailers, and the deadline has been set for Thursday 28 March.
Coles has stated that cash transactions will continue to be available into the future and that their preparation for Easter is just a back-up plan that is unlikely to impact their entire network of stores. Signage will be in place to notify customers and staff have been advised to notify customers before their items are scanned.
Woolworths has not indicated whether they have similar measures in place.
What now?
So, what now? Well, that depends on what happens with the Armaguard bailout. It is clear that collaboration will be needed to ensure that cash continues to be available. It is likely that the RBA and ACCC will work alongside the retail and banking industries as well as Armaguard itself to find a solution that doesn’t require ongoing cash injections.
It’s unclear what this might look like, though there are models that work overseas where there are similarly low rates of cash use. One idea is to create a cash transport network that is publicly owned, funded by government and banks.
Regardless of who is to blame for the situation, it is still important to push back. As we have seen before, once the big businesses realise that they can improve their profit margins and get away with it, they will. There is no regulation in place that ensures Coles and Woolworths will continue to accept cash transactions into the future. This could end up as a defacto trial of cashless supermarkets, leaving many high cash users in the dust.
It is also critical that the government continues to understand the importance of cash, even if fewer of us use it on a day-to-day basis. Many banks and ATMs have disappeared, particularly in regional towns. These communities rely on supermarkets and Australia Post outlets to access cash and pay bills.
As things are going, cash use in Australia will end with a slow decline into obscurity as it becomes more and more expensive to prop the system up.
That said, it’s important to remember that Coles checkout staff have no say in larger business decisions, and will likely be copping the brunt of the criticism. In a survey of 4,600 retail employees, 80% indicated that they have experienced verbal abuse from customers.
If you would like to tell decisionmakers how important cash services are to you, you can contact the ACCC here, Coles Group here, or contact your local federal Member of Parliament to raise your concerns.
