We see your cashless ATMs, marijuana industry

VISA recognized the trend to incorrectly encode POS transactions through cashless ATMs.

The payment company is the second largest in the world. It released a memo against the increasing rate that cannabis retailers are missing cashless ATMs to bypass existing restrictions in the United States. The memo warned customers that the law would soon be followed by penalties and other undisclosed enforcement measures.

Since the SAFE banking law attached to the new two-chamber deal was not passed by the Senate a few days ago, financial institutions are reviewing their customers’ debit and credit card purchases to make sure everything is in order. The SAFE Banking Act is a measure that would allow traditional financial institutions to provide services to operators within the cannabis industry without fear of penalties.

Right now, lawmakers are trying to find the best language for commercial marijuana banking.

Federal ban on cannabis

The existing bans on the cannabis industry have stifled the growth of this sector to some extent. This ban prevents marijuana retailers from accepting credit and debit cards as payment for products they have purchased. The use of these cashless ATMs is more or less convenient for customers to simply pay for purchased products or services. To an outsider, this is a smart business decision.

It is easier to maintain a cashless transaction device than having an ATM on site. That way, customers don’t have to show up with cash; they just have to show their cards like any other merchant. Visa’s compliance memo is short and does not provide details of the penalties or non-compliance assessments customers face.

The memo

Visa issued this compliance memo on December 2nd. The memo states that the financial giant is aware of the ongoing system that cannabis dealers practice to disguise cannabis-related transactions.

The memo explains that cashless ATMs are not intended to provide cash to cardholders; Instead, they are POS devices that should be used with payment applications that are similar to regular ATMs. The cashless devices are used to make purchases that are incorrectly marked as cash withdrawals from the ATM. Purchase amounts are often rounded up to simulate a cash payment.

Cannabis was not specified in the Visa memo, only mentioning that reverse ATMs are primarily marketed to types of merchants who are prohibited from using payment services due to visa requirements and legal or other government prohibitions. This is a category that mainly includes the cannabis business across the country.

The cashless ATM solution

According to Fincann CEO Nathaniel Gurien, thousands of cannabis retailers have no choice but to resort to what he calls a cashless ATM solution to accept cashless payments. He described the setup as brilliant and impressive. However, there is no denying that it is also illegal. Gurien wrote that it could be catastrophic if one or more US attorneys addressed this issue. The “solution” has the potential to cause massive damage to the industry and to set the industry back significantly. He added that this feat keeps him up almost every night.

Further calls for easier access to financial services

Steven Hawking, CEO of the US Cannabis Council, described the bans in the cannabis industry as unfair. In his interview, he said that a high percentage of cannabis retailers in the country are overwhelmed by these rules and tax rules that only seem against cannabis companies.

Hawking said the council and other proponents are calling on financial institutions such as payment companies and traditional banks to work with cannabis industry operators as well as lawmakers on payment options that would be appropriate for the cannabis space. In time, Congress will step in to pass the SAFE Banking Act as work is underway to finalize the details to ensure it next makes it to the Senate.

Morgan Fox, the media director for the National Cannabis Industry Association, expressed displeasure with the current state of affairs. He said it was sad that payment companies like Visa have refused to partner with the cannabis industry. According to him, this is a time when the country’s cannabis industry needs all the financial support it can get, not to mention cannabis is legal in dozens of states and raises billions of dollars annually to the economy of each state.

Many stakeholders within the industry have also expressed disappointment that financial firms are singling out the cannabis industry rather than endorsing it. What’s worse is that these financial institutions are also doing most of what they can to discourage other alternative solutions that could help solve the problem.

The cannabis industry will remain cash based

State restrictions on the cannabis industry could remain largely cashless in the near future until the Banks Safe and Fair Enforcement Act (SAFE) is passed. Only this or a similar measure can solve this problem.

Visa isn’t the only credit card network that the cannabis industry sees as a no-go area. Others like Mastercard and American Express are also avoiding the cannabis sector because of the risk of fines federal agencies could hand out.

All card users are now subjected to non-compliant assessments and penalties if they and / or third-party users are found guilty of failure to comply with established regulations. Any acquirer found to have intentionally violated Visa rules, negatively affecting the goodwill associated with Visa and / or the Plus system, brand, products and services. The acquirer may face additional regulatory compliance enforcement.

Bottom line

Cannabis needs to be removed from the List of Prohibited Substances in List 1 for any financial institution to be ready to liaise with the industry. In the absence of federal decriminalization, the SAFE Banking Act is the industry’s best way to have a normalized financial authority.

Trends towards cashless ATMs and other inevitable financial loopholes will continue to emerge as cannabis industry operators have no other option.

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