Cashless ATMs are a legitimate threat for cannabis dispensaries

March 3, 2024
compliant credit card and debit card processing for cannabis dispensaries

One of the most contentious and popular ways to pay for cannabis is a cashless ATM. Unfortunately, these aren't your standard ATMs. Instead, the checkout counter at the dispensary employs what appears to be a typical card terminal. Although the initial payment process looks like a regular debit card transaction, it is not how things work.

Even before dispensaries entered the picture, these machines served as a cover for illegal trade. ATMs that don't accept cash violate network standards and federal banking laws, and may require change from dispensaries for certain transactions. Ultimately, cashless ATMs have spread among dispensaries as a solution, but is it worthwhile?

What harm do cashless ATMs cause to marijuana dispensaries?

Employing a cashless ATM at a dispensary is a violation of US Codes 18 and 1956, specifically pertaining to the laundering of currency instruments. Most people associate "money laundering" with illicit activities, although cashless ATM fees can be categorized similarly. Customer transactions are hidden when a debit card is used for a cashless ATM charge at the register. Attempts to hide transactions severely violate the conditions of use of Visa and Mastercard. This can result in daily fines ranging from $2,500 to $200,000. In addition, sanctions may be imposed on dispensaries starting from the first day of noncompliance!

Retailers occasionally pass off cannabis purchases as debits. Customers must pay a convenience fee, like at an ATM, and they can round the transaction to the nearest $10. The merchant may receive commissions from this shady method of payment.

Some companies use cashless ATMs to hide their illegal activities, and local governments are starting to take action against dispensaries. For example, there was a widespread shutdown of hundreds of cashless ATMs in Colorado. Similar issues led to the closure of multiple dispensaries in San Francisco with only a 48-hour notice.

The continuation of cashless ATM fees could lead to the downfall or closure of numerous cannabis businesses. Cashless ATMs at dispensaries have advantages, but they are an unreliable and risky payment method. That represents a significant barrier for licensed dispensaries trying to adopt safe and legal payment acceptance practices. In addition, cashless ATM payments do not support online transactions, and dispensaries cannot accept Apple Pay.

Will ATMs disappear in the United States?

Is it likely that the US will one day be a cashless society? Many people no longer need ATMs that dispense cash due to the growing popularity of digital payments, wire transfers, and smartphone wallets for making payments. ATMs will continue to operate while there is still cash available. Dispensaries that accept Apple Pay and credit cards could eventually appear. As the legal cannabis market is still developing, keep an eye out for what might be in store.

What actions must dispensaries take to receive payments?

Consider how useful an app like Venmo or Cash App would be for legal cannabis. Numerous businesses strive to become the leading cannabis API hub. Our Sprout Processing offers an e-commerce platform with contactless payment options. It features a mobile react SDK and an open API. Using services such as Sprout Processing, dispensaries can effortlessly accept credit and debit payments that comply with all regulations. For specialist businesses like cannabis, Sprout Processing offers digital payment systems with multiple layers of security and compliance. Customers can pay at the dispensary either through the budtender or using their own phone. Our solution allows for cannabis dispensaries to accept Apple Pay, Google Pay, Samsung Pay, or even scan the customer’s card.

You can avoid extra fees at cashless ATMs by using credit and debit card processing designed for the cannabis industry. We even have contactless payment options. Dispensaries can accept payments online with Sprout Processing and customers can pay with their credit and debit cards.

Dashboard reviewing compliant credit card processing for dispensaries.

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