Cashless ATMs vs. Compliant Merchant Processing


With banking options still difficult for cannabis businesses to access – including the ability to accept debit and credit cards – cannabis companies are still searching for ways to facilitate their merchant processing needs. In a bid to take less cash and offer more payment options to their customers, some dispensaries and other cannabis-focused businesses have turned to cashless ATMs as a workaround that “allows” them to accept debit cards at the checkout counter.

While it may seem like a decent alternative, there are plenty of reasons to forego cashless ATMs altogether, first and foremost that these workarounds are patently illegal. Here’s what you need to know about cashless ATMs and how compliant merchant processing solutions stack up.

What are cashless ATMs?

Rather than utilizing a traditional ATM kiosk on site, a cashless ATM looks more akin to the credit or debit card processors that most point-of-sale systems use. Rather than using them to complete a transaction, a cashless ATM debits the amount of cash needed to cover a purchase. These amounts are not precise; for example, if a purchase is for $73, a cashless ATM will withdraw $80 (plus fees), and the customer will receive $7 in change.

While this entire process is different from a traditional ATM kiosk that most consumers are familiar with, and more Americans rely on plastic than paper when it comes to currency, proponents of cashless ATMs believe the alternative is a way to get around traditional banking institutions and their skittish stance toward the cannabis industry.

The issues with cashless ATMs

While they may seem like a balm for an industry being unfairly restricted from obtaining proper banking solutions, cashless ATMs can create several major issues for businesses using the technology. As a workaround for traditional banking solutions, their safe and legal use should be taken with a grain of salt based on the following notes:

  • Cashless ATMs are illegal. One of the biggest problems with cashless ATMs is that each transaction constitutes bank fraud and money laundering by deceiving the sponsor bank into supporting cannabis transactions against their policies. As an aside, MasterCard, Visa, American Express, Discover and JCB have all unambiguously stated that cannabis transactions are prohibited as long as the plant remains federally illegal.

    By using a system that makes a cannabis transaction look to a financial institution like a simple cash withdrawal, this constitutes an additional instance of fraud and money laundering. This fact was put to the test during a federal trial earlier in 2021, in which former Eaze CEO Jim Patterson was charged for tricking banks into facilitating $100 million in credit card-based cannabis payments. Two accomplices were eventually fined and were sentenced to prison.

    Cashless ATMs also run afoul of federal law when it comes to Dodd–Frank Wall Street Reform and Consumer Protection Act. According to a section of that legislation, dubbed the Durbin Amendment, debit card networks are prohibited from charging add-on fees when dealing with purchases of goods and services. Since cashless ATMs charge an “ATM convenience fee” that’s passed onto the consumer, they are in direct violation of that federal law.
  • Cashless ATMs are unstable. An entire cashless ATM system can go down at a moment’s notice. That’s because they operate on the assumption that the banks involved either do not know that a transaction is being done through a cashless ATM or that the network doesn’t care. Either way, obscuring these transactions from the sponsoring institution makes them an unstable target for enforcement, undergoing more scrutiny by federal law enforcement in recent months. This instability is even harder to justify when you consider that many of them require multi-year contracts.
  • Cashless ATMs are not consumer friendly. Though they help consumers pay for the cannabis-related goods they want, cashless ATMs can often make the shopping experience more costly and annoying than it needs to be. For example, the additional convenience fees and out-of-network fees associated with using a cashless ATM means customers that use the system tend to pay up to 18% more than those that pay with cash.

    Not unlike traditional ATMs, the cashless variants are also programmed to process transactions that equal a combination of currency. This means that if a consumer wants to pay for a $32.50 purchase, they will need to “withdraw” $40 from their account to equal the next highest combination of bills “dispensed.” That kind of inflexibility can be both clumsy, confusing, subject to error, and require additional bookkeeping and operational supervision, causing problems for both consumers and retailers, since they will have to settle the difference in cash.

If cashless ATMs are illegal, why do business still seek them out?

Thanks to the way federal banking laws are structured, cannabis businesses have historically had a hard time finding proper banking solutions. The major credit card network turns to federal policy when it comes to transacting with cannabis companies. Because cannabis is still federally illegal and considered a Schedule I substance under the Controlled Substances Act (CSA), they have unequivocally said that they will not allow cannabis-related transactions on their networks.

However, that does nothing to quell the fact that customers still want to use their debit or credit card to purchase cannabis. Studies show that American consumers are becoming less likely to carry cash on their person, and ATM trips before visiting the dispensary can be inconvenient nuisances. Cashless ATMs, therefore, seemed like a simple solution that more than 1,000 U.S. dispensaries have used in recent years. As we know from recent legal actions taken against Eaze, that “simple solution” can have serious consequences.

The only answer, then, is for cannabis dispensaries relying on cashless ATMs to get compliant – and fast. Thankfully, there’s a solution: A compliant, cannabis-friendly bank-endorsed merchant processing program developed and offered by Fincann.

Fincann’s Merchant Processing Program vs. cashless ATMs

As the cannabis industry’s recognized one-stop resource for finding proven, sustainable banking and financial services for plant-touching businesses, we at Fincann also provide a merchant processing solution. Through our program, dispensaries, delivery services, and other THC licensees can take advantage of this first-of-its-kind payment processing program.

By working with our partner financial institutions, we can provide a simple payment processing option that eschews all the pitfalls that come with cashless ATMs. Through our program, you can focus less on whether your customers can easily pay for your goods and services and instead focus on running the best business you can.

Ease of use

Where cashless ATMs stand in the way of simple point-of-sale transactions, our merchant processing solution works just like a regular debit card swipe. As a result, all sales are for the exact dollar amount, rather than needing to have cash debited at $10 or $20 increments. Furthermore, your cashiers will spend less time having to explain how the checkout process will have to go, since our solution works just like every other typical payment solution.

Zero contracts

Congress is already working on a bill that will make it easier for cannabis businesses to find proper banking solutions, which will signal to financial institutions that it’s safer to conduct business with the cannabis industry than previously assumed. That, coupled with the instability discussed above, means that you may not want to be contracted to a cashless ATM provider when more options become available. There is no early termination fee associated with our merchant processing solution.

No cash handling necessary

Unlike cashless ATMs, our solution does not require your cashiers to provide change in cash. Processing transactions for the precise dollar amount eliminates the need to break bills “withdrawn” during the cashless ATM transaction. That reduces checkout time and simplifies the procedure.

Fully transparent with banks

One of the biggest issues with cashless ATMs is the fact that they obfuscate the fact that they exist in the first place. Hiding their association with a cannabis business can cause major financial and legal problems down the road, since that’s the definition of fraud. Our solution is 100% transparent with our partner banks. There’s no need to hide any DBAs or provide any false address information, since the actual information will be listed on transaction descriptors and receipts. Best of all, our total transparency with the banks means that your dispensary or delivery service can begin immediately accepting credit card transactions when the major card networks begin to allow them.

Apply for bank-approved merchant processing through Fincann

It’s unfortunate that federal regulations have made it seem like cashless ATMs are a necessary evil for plant-touching cannabis businesses to accept card-based transactions. Yet as the sea change in Washington continues to take hold, such a solution will be needed less. Thanks to our banking network of cannabis-friendly financial institutions, our merchant payment processing solution lets you enjoy the ease of card payments without having to commit fraud. Visit the merchant processing program section of our website to learn more about your options.