If you’ve visited a cannabis dispensary recently, you may have noticed that when you use your debit card, the total is rounded up, and you receive some cash back with your receipt. This practice can seem odd at first, but it’s a result of how most dispensaries have to handle card transactions using a system known as the Cashless ATM. For both dispensaries and their customers, this approach plays an essential role in navigating the unique challenges of cannabis payment processing.
What Is a Cashless ATM?
A cashless ATM, despite its name, isn’t an ATM in the traditional sense. It’s a point-of-sale terminal that allows customers to pay using a debit card, similar to any card-based transaction, but with a key difference. Instead of processing the exact amount of the purchase, the system rounds up the sale to the nearest $5 or $10 increment, processing it as if it were an ATM withdrawal. The customer then receives change in cash for the difference between the rounded-up amount and the actual purchase price.
This mimics the experience of using an ATM, but instead of withdrawing cash for future use, the funds are directly deposited into the merchant’s account. The dispensary staff then provides the customer with the appropriate change. This method has become popular in cannabis dispensaries due to the lack of cannabis payment processing options. It’s important to understand why and how the cashless ATM fits into the larger picture of cannabis payment processing.
Why Do Dispensaries Use Cashless ATMs?
One of the primary reasons cannabis dispensaries use cashless ATMs is the lack of access to traditional banking and payment processing services. Due to federal regulations, cannabis businesses cannot accept credit cards, and many banks are hesitant to provide services to the industry. This is because cannabis is still classified as a Schedule I substance under federal law, even though it is legal for medical or recreational use in many states.
Payment networks like Visa and Mastercard, which operate under federal oversight, strictly prohibit transactions related to cannabis sales. This leaves dispensaries with limited options, as they cannot process traditional credit or debit transactions. Cashless ATMs provide a a valuable service, allowing dispensaries to offer customers the convenience of using their debit cards without violating federal regulations. The cashless ATM greatly increases the safety and efficiency of owning a cannabis dispensary.
Benefits of Using a Cashless ATM for Cannabis Payment Processing
Cashless ATMs have quickly long been a popular solution for cannabis dispensaries. As a matter of fact dispensaries have beed using cashless ATMs for 15 years or more. Here are some of the reasons why:
- Convenience for Consumers
Consumers increasingly prefer using cards over cash for everyday purchases. With cashless ATMs, dispensaries can cater to this demand, making the payment process easier and more convenient for their customers. Cashless ATMs eliminate the need for customers to visit a bank or ATM to withdraw cash before making a purchase. - Increased Sales
Card payments typically lead to higher spending compared to cash. The ease of using a debit card may encourage customers to purchase more than they would if they were limited to the amount of cash they have on hand. This, in turn, boosts sales for dispensaries. - Security for Businesses
Handling large amounts of cash presents significant risks for cannabis businesses. It increases the chances of theft, both internally and externally. By using cashless ATMs, dispensaries can reduce the amount of cash they have on hand, improving safety for both employees and customers. - Reduced Operational Costs
Processing transactions through cashless ATMs can also help reduce some of the costs associated with cash handling, such as armored transport services and the fees associated with maintaining large cash deposits. - Additional Revenue Stream
Since a cashless ATM works on the same rails as traditional ATMs business owners can share in the proceeds from the convenience fee.
The Challenges of Cashless ATMs
While cashless ATMs offer significant benefits, they are not without challenges:
- Potential Fees for Customers
One downside of using cashless ATMs is the potential for out of network fees. Since these transactions are processed as ATM withdrawals, customers may incur out-of-network ATM fees from their banks. - Compliance Issues
While cashless ATMs are widely used, and have been for over 15 years, there are occasionally challenges. Some providers of cashless ATMs have run transactions over interchange or through acquiring banks that did not agree to service the cannabis industry. When these are discovered the sponsor bank shuts them down without notice. While transactions may blur the lines of what’s considered to be an ATM transaction by financial institutions the cashless ATM continues to provide a valuable service to the industry. Interruptions and shut downs highlight the need for dispensaries to work with a reputable company who truly understands the cannabis industry and the banking regulations that surround it. - The Future of Cannabis Payment Processing
As cannabis businesses grow and evolve, BIG is always actively seeking more traditional, transparent, and compliant payment processing solutions. While cashless ATMs provide a convenient solution for now, they are not necessarily a long-term solution. As federal regulations shift and the cannabis industry gains greater legitimacy, there will be a need for more sophisticated and fully compliant cannabis payment processing systems. Once there is change at a Federal level and traditional merchant services become available to the cannabis industry merchants will need to be ready to adapt quickly.
The Path Forward: Building Sustainable Cannabis Payment Solutions
The use of cashless ATMs reflects the cannabis industry’s ongoing struggle to find workable payment solutions within the constraints of regulations. But the reality is that the cashless ATM may not be a sustainable option forever. As the cannabis industry continues to push for legitimacy and fair access to banking and financial services, dispensaries will need to stay informed about compliant and legal payment processing options.
For now, cashless ATMs offer a convenient solution that helps dispensaries keep up with customer demand for card payments. However, it’s crucial for cannabis businesses to stay ahead of the regulatory curve. As the industry grows and evolves, more legitimate, transparent payment processing options will emerge, making it easier for dispensaries to operate within legal boundaries.
Conclusion
Cashless ATMs play an important role in helping cannabis dispensaries meet customer demands for convenience while navigating a challenging regulatory environment. By allowing customers to use their debit cards for purchases, these systems offer a simple and effective solution that benefits both businesses and consumers. However, dispensary owners should stay vigilant and work with a provider who is one the cutting edge of compliant cannabis payment processing options.
As the cannabis industry continues to grow, finding sustainable and legal payment solutions will be essential for long-term success. For dispensaries looking to stay ahead, partnering with payment processors who understand the unique challenges of the cannabis industry is key. If you’d like to learn more about compliant cannabis payment processing solutions, contact us today at Bankcard International Group. We’re here to help your business grow while ensuring that you remain compliant every step of the way.
