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What is Cashless ATM?
Cashless ATM systems process cannabis purchases as ATM withdrawals. These models have faced increased scrutiny and shutdowns by sponsor banks and card networks.
What This Page Covers
- Why dispensaries use cashless ATM in the first place
- How the system actually works behind the scenes
- Why some programs suddenly shut down
- What happens when your processor pulls the plug
How Cashless ATM Actually Works
Cashless ATM was designed as a workaround when credit cards were blocked.
Here’s what happens:
Customer buys $46 in product.
The system does not process a retail sale.
Instead:
It runs a $50 ATM withdrawal.
The customer receives $4 back in cash.
On the banking side, the transaction is recorded as an ATM withdrawal, not a cannabis retail purchase.
That distinction is why it worked.
Why Cashless ATM Programs Get Shut Down
Cashless ATM is not a formal card-network-approved cannabis payment solution.
It operates in a gray zone.
Sponsor banks and card networks monitor:
- Repeated rounding patterns
- ATM coding used for retail behavior
- Merchant category code inconsistencies
- Network rule violations
When networks tighten enforcement or sponsor banks reduce risk exposure, these programs are often terminated.
Shutdowns are usually industry-wide, not individual-store misconduct.
What Happens When a Cashless ATM Program Shuts Down
- Processing stops immediately
- Funds may be held for review
- Transactions decline at checkout
- Stores revert to cash-only overnight
There is rarely advance notice.
Related Pages
- Why Cannabis Businesses Struggle With Banking and Payments
- What is Cashless ATM?
- Why Can’t Dispensaries Use Credit Cards?
- Can Dispensaries Use ACH Payments?
- Why Are Cannabis Merchant Fees 4–7%?
- What Is IRS 280E and Why Does It Increase Cannabis Taxes?
- Why IRS 280 Drains Your Bank Account
