Cashless ATMs aren’t necessarily new, but they’ve become much more common, especially in connection with marijuana-related businesses (MRBs). Large payment networks don’t allow marijuana/cannabis-related transactions, so dispensaries often use cashless ATMs as a workaround. Cashless ATMs act just like normal ATMs but, as the name implies, they don’t actually give out cash. Instead, they allow customers to pay for products using their debit card in a way that looks like a cash withdrawal. While MRBs obviously like cashless ATMs because they don’t have to rely as heavily on physical cash, the growing use of these machines has raised some red flags, especially for financial institutions. Use of them makes it easy to conceal not only who is buying and selling the product and the flow of money, which can make spotting illegal activity difficult.
Cashless ATM transactions often violate rules set by credit card companies as well since they often obscure the nature of the transaction by coding purchases as ATM withdrawals. This could also have implications for Regulation E error resolution disputes. Visa has explicitly warned financial institutions that this practice circumvents their transaction coding standards which can trigger fines, sanctions, or even loss of access to card network services.
Cashless ATMs pose another level of risk, even beyond that of other types of privately-owned ATMs. If your institution hasn’t discussed cashless ATMs and the associated risks, now is probably a good time. Are your teams prepared to spot this type of activity? Are your systems set up to flag changes in customer behavior? Cashless ATMs are more than just a new way to pay; they pose a challenge to financial institutions to be alert and adaptable to a changing industry.
We discussed this more in our magazine Banking on BCC so be sure to check it out.
Published
2025/06/23