Big banks, retail giants and Australia Post have agreed to a $50 million bailout for the struggling cash transit business Armaguard, in a move aimed at securing cash supplies for at least the next year.

As use of cash continues to drop and consumers opt for electronic payments, the nation’s main cash delivery business Armaguard, owned by billionaire Lindsay Fox’s company Linfox, last year said its future was at risk.

It subsequently entered into high-stakes talks with banks and other big customers over a rescue package. These talks hit a wall in March, when Armaguard received a short-term lifeline from Linfox and instead tried to negotiate with banks individually.

On Monday, Armaguard said it had struck a deal with a consortium comprising the Australian Banking Association, the Commonwealth Bank, NAB, Westpac, ANZ, Coles, Woolworths, Wesfarmers and Australia Post.

The announcement, which followed a report in The Australian Financial Review, said Armaguard would need to hit monthly performance indicators to receive the payments. The parties will also work together on developing an “independent pricing mechanism” aimed at supporting sustainable cash delivery services in the longer term.

Australian Banking Association chief executive Anna Bligh said the agreement would shore up cash distribution for the next year, while giving Armaguard time to lock in the benefits of a merger.

“This deal will keep cash moving around the country and ensure it remains available to Australians wherever they live,” Bligh said.

Last year, Armaguard was given the green light to merge with Prosegur, even though it would create a near monopoly with market share of about 90 per cent in the cash-in-transit sector.

Bligh said Armaguard would have time to restructure the business after the Prosegur merger, and Monday’s agreement would also give the parties time to “work through possible long-term solutions for sustainable cash access into the future”.