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The Importance of Finding a Compliant Payment Solution for your Cannabis Business

By Chase Nightingale

The cannabis industry has faced numerous challenges when it comes to payment processing due to strict banking regulations and federal laws governing cannabis sales. However, the recent shutdowns of cashless ATMs and MasterCard PIN debit processing have highlighted the importance of working with compliant payment processing solutions for cannabis dispensaries and delivery services. In this blog post, we will explore the significance of such solutions in ensuring secure, compliant, and efficient transactions within the industry.

Cashless ATMs: The First Wave of Troubles

Cashless ATMs were once a popular workaround method used by cannabis retailers to accept debit card payments. By rounding purchase totals to a flat amount and providing cash back to customers, these ATMs masked the transaction to prevent banks from recognizing it as a cannabis-related purchase.

The name “cashless ATM” can be misleading, as the charges associated with it differ from a typical ATM withdrawal. When using a cashless ATM processor for a purchase, you might observe that the dispensary’s name is absent from the transaction record. This technique, known as “masking,” aims to hide cannabis-related transactions from being identified by banks in your account.

This workaround solution had become a $7 billion loophole in the banking system. Although it may seem more convenient than using cash, this approach violates card network policies and incurs additional and needless processing fees. The attempt to shutdown cashless ATMs following VISA’s warning signifies the need for compliant payment solutions.

The Downfall of MasterCard PIN Debit Solutions

The prohibition of MasterCard PIN Debit transactions signifies the second wave of challenges for digital payment solutions catering to cannabis consumers. 

In July 2023, MasterCard Inc. directed banks and payment processors to cease permitting cannabis transactions via debit cards. The move, which would rob cannabis buyers of another easy-to-use mode of payment, was first reported by Bloomberg News. This unexpected move has far-reaching implications not only for the beleaguered cannabis industry but also for banking transparency.

The MasterCard PIN Debit shutdown has resulted in difficulties for companies that facilitated PIN debit payments for cannabis. These firms are now scrambling to offer alternative solutions to dispensaries who rely on their services. 

Historically, Cash was the Solution

Until recently, the primary mode of payment for cannabis dispensaries has been predominantly in cash, with only a few having access to a bank account. As you can imagine, this approach is far from safe & secure for these businesses. For starters, holding large amounts of cash on-site exposes dispensaries to the risk of robberies. Moreover, human error can lead to imprecise record keeping. 

Transitioning to digital payments in the cannabis industry would enable dispensaries to function more like conventional competitive retailers. To achieve this, dispensaries require a platform that offers customers various payment options while maintaining precise record-keeping that complies with federal banking regulations. PayRio fits the bill perfectly, providing both these essential features and more.

The Cannabis Industry’s Struggles

In light of the crackdown on cashless ATMs, many businesses shifted to PIN debit solutions. However, the current shutdowns have left businesses with even fewer alternatives. Many businesses will be forced to go back to cash-only operations. 

While dispensaries can operate in cash, compliant digital payment options are far more convenient for customers, who have shown a willingness to pay substantial surcharges for the ease of card payments.

Contact PayRio for Cannabis Payment Solutions

For dispensaries searching for solutions in the wake of the MasterCard PIN debit shutdown, PayRio offers a fully-compliant cannabis payment solution. Contact PayRio to learn more about how we can help navigate the complex landscape of cannabis payment processing.