It’s no secret that the cannabis market is an opportunity for growth, but implementing digital payments transactions remains one of the industry’s biggest hurdles. Only accepting cash doesn’t always provide the convenience customers have come to expect. However, VARs and ISVs looking to address the cannabis industry’s cash-only payment challenge will need to find alternatives to cashless ATMs that some businesses used creatively.
Cashless ATMs Are Prohibited
While ten states have legalized cannabis for recreational use and 33 more for medicinal use, at the federal level cannabis is still illegal. The payments landscape for this market is complicated, considering many large banking institutions and credit card brands are federally regulated. Legislation is evolving to create protection for financial institutions to provide services to cannabis businesses, but until then, dispensaries and other retail outlets have fewer options when it comes to accepting payments for goods.
The use of cashless ATMs provided a workaround that enabled consumers to make their cannabis purchases using a credit or debit card. These point of sale devices mimicked standalone ATMs, except cash disbursements were not made. While the transaction itself was quite similar to other payment card transactions on the consumer end, it would be coded as a cash withdrawal, and the business would then be “paid” for the withdrawal through their merchant account.
In December, VISA issued a press release warning acquirers and related ISOs or third-party servicers that using point of sale devices in this manner violates the terms of Visa Rules, and those found in non-compliance through regular assessments can be subject to penalties.
Alternatives to Cash-Only Payments
Though the cashless ATM is no longer an alternative, VARs do have options for providing cannabis businesses with digital payments.
ACH-Based Apps
ACH transactions allow for the immediate electronic transfer of money between two parties. They are a simple, secure, legal, and reliable way for cannabis businesses to receive payments. It’s made possible through third-party applications, like a mobile app where customers can deposit funds into a mobile wallet on the app and then use the app to make purchases at dispensaries.
The downside is that it requires the customers to download and set up the app. On the business side, VARs can help ensure that the dispensary’s POS system is integrated to accept these payments in the most efficient way possible.
PIN Debit-Only Solutions
Debit transactions authenticated by a PIN are similar to ACH in that they comply with current regulations. However, debit transactions run on the same payment rail that credit card processing runs on, whereas ACH is a different rail entirely. Banks, not card brands, support these transactions, and the banks that offer this option are careful to comply with all regulations related to dealing with cannabis businesses.
The Wild West of Cannabis
The cannabis market is new, booming, and still exploring new territory. That’s why dispensaries and other cannabis-related businesses rely on the expertise of ISVs and VARs to help navigate through its rapid evolution. It’s what also makes it an ideal growth market for VAR businesses. Cannabis business owners are often new entrepreneurs who are highly adept at product development but need support from providers with IT experience to help operate at optimal efficiency.
To be successful, however, it’s critical for you to understand this space’s unique requirements and help dispensaries operate compliantly – for example, guidance on cashless ATM solutions. Your clients will rely on you to be up-to-date with solutions that enable convenient, compliant payments.
