By clicking Accept, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Pprivacy poprivacy policy for more information.

Compliance in Cannabis: Cashless ATM Shut Down

Compliance
Security
Cannabis
December 12, 2022
Adam Glogovsky

Cashless ATM shut down 

Cannabis retailers nationwide have been rushing to find an alternative to cashless ATMs given the recent shut down last week. Until now, you would have seen many dispensaries accept debit card payments where totals were rounded to a flat amount and cash was given back to the customer. This is called a cashless ATM and has been recently shut down following VISA’s warning a year ago. It was a workaround method that was never compliant and evolved from traditional credit card companies not wanting to touch cannabis due to it being federally illegal.

The name cashless ATM is deceiving – these charges are not simply like a withdrawal from an ATM. After a purchase was made using a cashless ATM processor, you’d notice the name of the dispensary was missing. This method is called “masking,” and it prevents banks from recognizing a cannabis transaction in your bank account. While this method did appear to be more convenient than paying with cash, it was against card network policy and also added unnecessary processing fees.

What does it mean to be compliant?

The cannabis industry has to face cannabis banking regulations and it is an extremely difficult task. Federal laws tediously regulate marijuana sales in the U.S. Regardless of the fact that cannabis is now legal in some form in 47 states, nationally, it is still treated like an illegal drug. Under the Controlled Substance Act, it’s categorized as Schedule I, which is the grade with the highest scrutiny when it comes to the production and selling of the product.  These laws require financial institutions to keep very detailed records of all activity in a dispensary’s account. If any activity sounds any alarms – such as possible money laundering schemes – the account must be reported by the bank to the Financial Crimes Enforcement Network (FinCEN). If a bank fails to catch a problematic charge, they are hit with large fines. However, FinCEN’s guidance of suspicious activity is ambiguous, and banks are afraid to take on the liability. Dispensaries find themselves overwhelmed too. Budtenders don’t always have the knowledge or the capability to hire employees able to navigate the paperwork involved in properly recording their transactions.

Customers find themselves asking, “Are there any dispensaries that accept credit cards?” The answer is no. Large payment processors, such as VISA, avoid working with dispensaries at all to avoid the strict laws and possible prosecution. 

Historically cash was the solution

So, up until recently, most cannabis payments for dispensaries have been made predominantly in cash, and not a lot of dispensaries have a bank account. As you can imagine, this is not the most secure and safe way for dispensaries to operate. First, having large amounts of cash on hand puts businesses at risk for robberies. Also, human error can lead to imprecise record keeping. Then there is the fact that ecommerce cannabis practices will allow dispensaries to act more like a traditional, competitive retailer. A platform that gives customers payment options and diligent record keeping that adheres to federal banking laws is exactly what dispensaries need – Aeropay can do both of these things and more. 

Why it’s ok to pay with Aeropay

Aeropay offers customers the ability to purchase cannabis via ACH payments, or bank-to-bank transfers. By using this payment platform, customers can make purchases at local dispensaries and have a seamless checkout experience, all from their phones. Shoppers can simply create a profile, link their bank account and they are ready to shop. Enabled with sophisticated and secure technology, with an emphasis on operating compliantly, Aeropay is a forward-thinking payment solution that allows cannabis retailers to finally offer mainstream customer experiences. 

Aeropay noticed that dispensaries could become a lot more efficient if there was an easy way to ensure their cannabis payment processing was compliant with federal laws. The team at Aeropay are masters of regulatory approval and do all of the tedious banking for their clients. All cannabis payments are handled with integrity in a way that is timely, accurate and authorized. 

Backed by a bank

Aeropay’s hard work is recognized by the leading compliance-based banking program. Fully transparent cannabis payments are powered by a partnership with Safe Harbor, affiliated with Partner Colorado Credit Union. This means that all payments are backed by a secure financial institution. This was not the case when dispensaries were accepting “cashless ATM charges.” 

Safe and secure payments for dispensaries

The web-based payment solution was strategically created with added layers of security for specialized industries. But because customers are able to create an account, link their bank account and make a purchase in under one minute, some might ask, is Aeropay safe?

The answer is yes - Aeropay has bank-level encryption, fraud prevention and risk reduction measures that promise every budtender and customer peace of mind.  Aeropay is vigilant on security and protecting data. Each customer’s profile only requires necessary details (no social security or other sensitive information needed). Also, Aeropay enables multi-factor authentication to make logging into accounts even more secure.

Clients are vetted

In order to maintain an exemplary reputation, all of Aeropay’s clients are fully vetted. This assures that everyone who works with Aeropay is in good company. It also establishes a very trustworthy relationship with banks like Safe Harbor. 

There is some legislation, such as the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act), that has passed the U.S. House of Representatives, but the current banking issues will likely remain unchanged until federal reforms are actually signed into law.

Aeropay is ready to be used today. With the convenience of a cashless payment option, but with the security and compliance that is required by dispensaries – Aeropay delivers on all fronts.

Author

Adam Glogovsky

Senior Director, Risk & Compliance
Back to the blog
Back to product updates
Schedule a demo

Seeing is believing.

We’re happy to show you our full payments solution and put the best bank-to-bank transfers to work for your business.

Book a demo with Aeropay
Just 15 minutes
Specific to Your Business
No tech experience needed
Schedule a demo

Seeing is believing.

We’re happy to show you our full payments solution and put the best bank-to-bank transfers to work for your business.

Book a demo with Aeropay
Just 15 minutes
Specific to Your Business
No tech experience needed
Schedule a demo

Seeing is believing.

We'll talk about your big ideas and how payments can support your vision.

SDK & API optionality
Plugin information
Dedicated integration specialist
Onboarding and implementation
Schedule a demo

Ready to put integrated payments to work?

We’re happy to show you our full payments solution and put the best bank-to-bank transfers to work for your business.

Partner with Aeropay
Just 15 minutes
Specific to Your Business
No tech experience needed