What is really happening when a business allows you to make a cannabis related purchase with a debit card.
As the cannabis industry rapidly grows and evolves, dispensaries continuously look for cash alternatives, including cashless automated teller machines (ATM).
The cannabis industry newswire exploded at the end of 2021 when Visa issued a statement titled “Cashless ATM” and Misuse of ATM Transactions Prohibited.
In this statement, Visa stated, “Cashless ATMs are primarily marketed to merchant types that are unable to obtain payment services — whether due to the Visa Rules, the fuels of other networks, or legal/regulatory prohibitions. Therefore, supporting this scheme affects the integrity of VisaNet and the Plus network, as well as the Visa payment system”.
This has impacted the cannabis industry, as many businesses have used Cashless ATMs as an alternative to payment methods used in traditional retail.
A customer requests $100 at a cashless ATM terminal. After providing necessary security info, i.e., Personal Identification Number (PIN), the terminal dispenses a receipt to the customer. The customer presents the receipt to the budtender. The budtender deducts the purchase total, applicable tax, and cashless ATM fee and returns any remaining change to the customer, still requiring dispensaries to have cash on hand.
Check out our guide on The Risks of Cannabis Cash Payments.
Cashless ATMs allow dispensaries to accept debit card payments indirectly. A dispensary customer uses the cashless ATM to withdraw cash from their bank account and purchase cannabis products at the point of sale without handling money for most or all of the transaction. On the consumer’s bank statement, rather than charges appearing as a payment made at a dispensary, the transaction appears as a cash withdrawal from an ATM.
Cashless ATMs permit the processing of cannabis payments with credit card rails - which is illegal.
"In short, processing a credit card payment for cannabis would be not only a violation of Network Rules, but it would be a violation of federal law as well. Further, a violation of Network Rules may result in disciplinary action against the Merchant, as well as a potential fine of $200,000 or $2,500 per day (which can be retroactively applied to and from the first day of noncompliance), and termination of the Merchant’s account.”
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