Marijuana Retailers Use Cashless ATMs As Workaround For The Lack Of Cannabis Banking
This past month one of the world’s biggest credit card companies sent a compliance message to its customers. This was done to alert them that miscoding point-of-sale transactions are being done. This is happening through the use of so-called cashless ATMs. This is a tactic used by some cannabis vendors as a workaround to accept credit or debit cards for purchases. Now, this particular practice—could lead to penalties or other unknown legal action.
The warning comes as lawmakers in Congress wrestle with how to handle banking for legal cannabis businesses. A defense bill back in September was passed by The House. Inside this defense bill was a measure to enact cannabis banking reform. Which would have protected financial institutions that work with state-legal marijuana businesses. Yet after discussions with the Senate, those conditions were not attached to a new bicameral deal filed at that time.
Some media outlets were able to obtain Visa’s December 2nd memo. What is known is Visa is “aware of a scheme” that some are using. Which is the cashless ATMs in order to effectively find a workaround. Specifically on the type of sales that payment cards can be used for.
“Cashless ATMs are POS devices driven by payment applications that mimic standalone ATMs. However, no cash disbursements are made to cardholders,” the memo explains. “Instead, the devices are used for purchase transactions, which are miscoded as ATM cash disbursements. Purchase amounts are often rounded up to create the appearance of cash disbursement.”
Cannabis Sales And Payment Processing
For instance at a marijuana dispensary with a $55 dollar sale potentially could be rounded up to $60. As well as being coded as a cash disbursement. The dispensary would then deduct the sale price and taxes from the $60. After the retailer would give the change to the customer. To the processing company, it looks like a normal $60 ATM withdrawal. However, the customer believes they have just made a purchase with a card.
Now the memo released by Visa doesn’t exactly speak on cannabis specifically. Still, it does mention things about cashless ATMs, which are sometimes called reverse ATMs. What was said is they “are primarily marketed to merchant types that are unable to obtain payment services. Whether due to the Visa Rules, the rules of other networks, or legal or regulatory prohibitions,”. A category that includes cannabis businesses.
With cannabis still federally illegal, it’s halting most cannabis shops from using credit or debit cards. There have been some people who have seen cashless ATMs as an amenity for customers. Where some feel it is an inelegant business move. Instead of preserving an on-premises ATM or asking people to show up with just cash, they can in turn use a card. Companies that market cashless ATM machines have told retailers that customers seem to spend more when they can buy things with a card.
[Read More] Legislators In Maryland Want To Correct The States Cannabis Legislation In 2022
The Fight For Cannabis Banking
Nathaniel Gurien, who is CEO of Fincann, supplies financial services, particularly to cannabis businesses. Mr. Gurien calculated that a large number of cannabis vendors in the U.S. currently use what he called “the cashless ATM solution”. A Method that is used in order for some dispensaries to accept cards. A tactic he portrayed as “clever, attractive and likewise fraudulent.”
“What keeps me up at night is that when, not if, one or more eager assistant U.S. attorneys with their eye on advancement sinks their teeth into this, it has the catastrophic potential to derail our industry’s momentum and inflict great damage,” he said in an email to an online marijuana media outlet.
Visa’s compliance memo is brief when it comes to enforcement. Misuse of cashless ATMs “will be subject to non-compliance assessments and/or penalties” or “subject to further compliance enforcement,” it says. Though still doesn’t contain details.
[Read More] Indiana Is On Its Way Towards Legalize Cannabis In 2022
Final Thoughts On Visa Aiming Cannabis Retailers
The company did not instantly reply to the emails and phone messages from the online media outlet. The CEO of the US Cannabis Council, Steven Hawkins, shared some words in a statement to this same cannabis outlet. Hawkins said that cannabis retailers across the USA “are being squeezed by unfair banking and tax rules that single out cannabis businesses.”
[Read More] Top 10 Marijuana Stocks For Your 2022 Watchlist
“We urge Visa and other financial institutions to constructively engage with lawmakers and the cannabis industry on payment options,” he said. “Ultimately Congress will need to step in by passing the SAFE Banking Act, which we are urgently working to pass.”
MAPH Enterprises, LLC | (305) 414-0128 | 1501 Venera Ave, Coral Gables, FL 33146 | new@marijuanastocks.com
