Cannabis Cashless ATMs Outages Explained

March 3, 2024
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Cashless ATMs are not compliant. Sprout Processing is fully compliant.

Card networks may be enforcing the ban on marijuana purchase transactions on their ATM networks. The cashless ATM era for cannabis can end if there is a widespread shutdown.

Contrary to popular belief, cashless ATMs may soon become obsolete because of their popularity as a short-term cannabis payment option.

Cashless ATMs relied on keeping the transactions hidden. However, as the number of cashless ATMs grew, it became harder to conceal their activities.

Suppliers had to turn to larger banks and processors due to the increasing volume, which would cause them trouble if they violated the terms of the Visa and Mastercard networks.

Three Entities Needed For Payment Processing

A cashless ATM has three main parts: a financial institution, a card network (like Visa, Mastercard, etc.), and a processor. If you take off one leg, everything comes to a standstill.

The closure of many big companies can be hard to recover from because few banks and ATM processors are willing to handle cashless ATM transactions involving cannabis.

Enforcing the laws entails

Cannabis transactions of any type are not permitted on Visa's or Mastercard's networks, as has been made very apparent. In December 2021, Visa warned that using its ATM network for cannabis transactions presented as ATM withdrawals would lead to penalties. Participants in the cannabis cashless ATM program received a letter from Mastercard in the summer of 2022.

It's difficult to shut down cashless ATMs utilized for marijuana transactions. To stop fraudulent transactions, Visa and Mastercard must depend on processors and financial institutions. They are unable to ban transactions themselves.

ATM processors and banks said they couldn't tell the difference between cash transactions for cannabis and legal cash transactions. Voucher machines are utilized by cashless ATMs (or banking stations), which means banning all of them is not an option. Voucher machines are also used for authorized cash withdrawals.

Third-party cashless ATM resellers sometimes submit ATM contracts with wrong addresses and company names, further complicating the situation.

Visa and Mastercard have released a white paper with tips on recognizing cannabis firms and transactions to aid processors in detecting cannabis transactions.

Visa will soon start enforcing its network rules, which may lead to a global shutdown. This will happen one year after sending a warning letter and giving processors and financial institutions time to follow the guidelines.

What's Next?

Since the popularity of cashless ATMs, cannabis payments have advanced significantly. Accepting credit cards can attract new customers and increase their spending.

The recent shutdown of cashless ATMs may have serious and widespread effects. However, we hope it will encourage dispensaries to adopt a more advanced and compliant payment method. Sprout Processing has established clear relationships with banks and processors and provides fully compliant credit and debit card processing for dispensaries.

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