Cashless ATMs Mask Estimated $7B in Cannabis Transactions

Cashless ATMs have reportedly been used to process some $7 billion in cannabis transactions, Bloomberg reported on Friday (April 1).

Legal cannabis retailers have had problems facilitating payments due to the fact that marijuana is still illegal on the federal level, a continuing conflict with banks, making it just about impossible for shops to accept payments aside from cash.

But a loophole has made it possible for dispensaries to accept cards, Bloomberg reported. Cashless ATMs could possibly process as much 25% of the estimated $28 billion projected to come in from U.S. dispensary sales this year.

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“Those sales could generate more than $500 million in fees for payment processors, based on average purchase sizes,” Bloomberg reported.

Payments processing technology has the ability to potentially misidentify purchases as coming from an address close to a dispensary.

Instead of dispensing cash, the “machines work with software that programs them to send signals down debit rails, where they eventually run through a sponsor bank before triggering a sweep of funds from a customer’s account to the store’s,” per the article.

Bad addresses can sometimes block an audit and “disguise large money flows.” But some people in the industry don’t think that erroneous addresses are random errors.

“The address is being used to trick parties to the transaction,” said Nathaniel Gurien, CEO of New York-based FinCann, which advises cannabis industry clients on payment processing and sells a product that competes with cashless ATMs. “This is part of the overall program. You’re not going to see Bob’s Cannabis Store.”

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Visa Inc. said in a Dec. 2 memo to clients that it was “aware of a scheme” involving cashless ATMs and that such transactions are prohibited on its network. A Visa spokesperson told Bloomberg that marijuana transactions aren’t allowed on the network until federal laws permit it.