Cashless ATMs, more than meets the eye. A risk to all dispensaries and the cannabis industry.

Cashless ATMs are one of the most controversial and widely used cannabis payment options. These aren’t traditional ATMs. Instead, what looks like a standard card terminal is used at the checkout counter of the dispensary. The checkout process starts like a typical debit card transaction, but that’s not the reality of the situation.

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These machines have been a front for illicit business activity even before dispensaries came into play. Cashless ATMs violate network standards and federal banking laws and are not always cashless, as some dispensaries have had to provide change for certain transactions. Ultimately cashless ATMs have become a common workaround solution for dispensaries, but are they worth it?  

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How are Cashless ATMs harmful to Cannabis Dispensaries?

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If a dispensary uses a cashless ATM, it is a violation of 18 U.S. Code and 1956: Laundering of Monetary Instruments. When seeing the phrase ‘money laundering’ most people think of illegal operations, but cashless ATM charges can be grouped similarly. When a debit card is used for a cashless ATM charge during checkout the customers' transactions are masked. Attempting to disguise transactions is a significant violation of Visa and Mastercard’s terms of use and can reach potential fines of $2,500 to $200,000 per day. Not only that but penalties can be retroactively applied to dispensaries from the 1st day of noncompliance!

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Sometimes retailers will disguise a cannabis purchase as debit. This lets them round the transaction up to the nearest $10 and requires customers to pay a convenience fee like at an ATM. This disguised form of payment can also cause fee kickbacks to the merchant. 

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Businesses that are a front for illegal operations use cashless ATMs to hide their activity, and local governments have been cracking down on dispensaries. In Colorado, there was a massive shutdown of hundreds of cashless ATMs. Similar issues occurred in San Francisco, and numerous dispensaries were shut down with only a 48-hour notice.

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Persisting with cashless ATM charges could result in the shutdown or failure of many cannabis dispensaries. There are benefits to using a cashless ATM during checkout at your dispensary, but at the end of the day, it’s a form of payment that is unfamiliar and dangerous to customers. That’s a major hurdle for legal dispensaries trying to implement compliant and safe ways to accept these payments. Checkout with cashless ATMs also doesn’t support online purchases and won't allow dispensaries to accept Apple Pay.

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Will ATM machines become obsolete in the United States? 

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Is it possible that the U.S. will become a cashless society in the future? With digital payments, e-transfers, and smartphone wallets now seen as the common form of payment, customers may no longer need cash-dispensing ATMs. Cash is still available for now so until that happens ATMs will stick around. Eventually, we may see dispensaries that take Apple Pay and cannabis credit card processing. The legal cannabis industry is still new, so be on the lookout for what’s to come.

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What are the next steps for dispensaries in accepting payments?

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Many companies would love to be the next big cannabis API; think of how helpful an app like Venmo or Cash App for legal cannabis would be. Unfortunately, we aren’t there yet, but dispensaries can begin looking for ACH-based solutions, such as Aeropay. Aeropay offers digital payment solutions with layers of security and compliance for specialized industries, including cannabis. Customers can scan the QR code at the dispensary, link to their bank account and pay. 

Using compliant ACH-based contactless payment solutions will help avoid the extra card fees associated with cashless ATMs. Aeropay offers bank-to-bank transfers that are compliant and allows dispensaries to accept payments online.