Visa wrote to banks and other financial institutions on December 2, cautioning that it was aware of a “scheme” where cashless ATMs are purposely miscoded to conceal the real nature of the payment.
More specifically, cashless ATMs used for cannabis transactions are misrepresented as ATM cash withdrawals. “They are called ‘cashless’ since the cardowner receives goods rather than money,” noted Akerna, a Denver-based cannabis tech business, in a press statement.
Visa cautioned that those found out of compliance would face undefined punishments and fines.
Though the card company did not mention the cannabis sector in its letter, industry insiders saw it as a caution that Visa is looking into the ATMs used at marijuana stores across the country.
Akerna believes that 50 percent of all marijuana outlets in the United States have cashless ATMs— that adds to thousands of merchants.
According to MJBizFactbook, there are about 8,800 cannabis retail outlets countrywide, plus the 3,300 establishments owned by joint venture businesses.
Despite the federal prohibition on marijuana and the overall absence of banking services for many Cannabis enterprises, cashless ATMs have remained a typical payment method at retail outlets over the last few years.
Now, what does that mean for the marijuana sector?
Industry experts feel that the statement was Visa’s first move to what could be a complete industry crackdown.
“If I had to speculate, this is probably the start of a much larger operation,” said Tyler Beuerlein of Arizona-based Hypur, which links cannabis entrepreneurs with banks. “And in previous cases of them taking that route, we may soon see hefty fines if they learned the banks allowed these payments.”
Beuerlein says Visa plans to take down all cashless ATMs that violate its policies, including those used to enable marijuana payments.
“I believe there is a determined attempt to shut down this model permanently,” Beuerlein stated, adding that the closures might start anytime.
According to Sundie Seefried, CEO of Safe Harbor Financial, this has some merchants planning on how to shift – and how to protect themselves legally – if Visa takes down cashless ATMs.
“Right now, we’re reaching out to all of our marijuana clients saying, ‘Here’s the memo, start thinking of a backup plan like ach debit or crypto payments, take time to discuss with your lawyer and develop a strategy. It’s crucial to figure this out because Visa is telling us to do so,'” Seefried said. He believes cashless-ATM closures will begin in February.
Blair Thomas has been a music producer, bouncer, screenwriter, and for over a decade, the Co-Founder of eMerchantBroker, the highest-rated provider of high-risk merchant accounts in the country. He has climbed in the Himalayas, survived a hurricane, and lived on a gold mine in the Yukon. He currently calls Thailand his home with a lifetime collection of his favourite books.