Transitioning from Cashless ATMs to PIN Debit

Cashless ATMs are the ultimate cannabis payment work-around and while their shutdown was abrupt, it’s not shocking because of a prior warning from Visa for violating network rules.

Losing your payment processing is frustrating but cannabis payments have evolved significantly so transitioning away from cashless ATMs is an opportunity to upgrade to more modern, transparent, and sustainable payments.

Modern cannabis payments

PIN debit processing is the cornerstone of a modern cannabis payment strategy that also includes integrated ACH payments for online and in-app purchases. PIN debit provides a traditional payment experience customers are accustomed to, and integrated ACH payments enhance the convenience and efficiency of order-ahead purchases.

Even though cashless ATMs are often marketed as debit card payments they’re very different than PIN debit. This guide will help you understand the differences and what to look for when choosing a provider.

Differences between PIN debit and cashless ATMs

Use cases

PIN debit transactions, like cashless ATMs, only work for card-present transactions and customers must enter their debit card PIN at the time of payment. PIN debit payment terminals are available with USB cable, wi-fi, Bluetooth, and 4G cellular capabilities and can be used for in-store, curbside, and delivery transactions.

Checkout process

PIN debit works with any debit card and lets you process payments for the exact amount of the sale. You don’t need to round the transaction amount up to the nearest 5- or 10-dollar increment like cashless ATMs.

Paying for a cannabis purchase using PIN debit is the same as using your debit card at the grocery store.

Application process

Applying for a merchant services account, especially in a high-risk or highly regulated industry, requires thorough underwriting of the business and beneficial owners. Cannabis PIN debit processing follows payment industry standards for underwriting.

Underwriting helps ensure the sustainability of your merchant services account and can make the transition to credit card processing smoother when it’s available.

Contracts

PIN debit utilizes a standard merchant services agreement which, depending on our provider, can also be used for credit card processing when available.

Cashless ATM contracts are nothing more than an ATM placement agreement (basically, an agreement for the provider to put an ATM in your store).

Fees

The fee structure is a big difference between PIN debit and cashless ATMs.

Cashless ATM transactions are processed as an ATM withdrawal, so fees consist of a fixed ATM fee paid by the customer (often called a “convenience fee”). Depending on their bank, customers may also have to pay an out-of-network ATM fee.

PIN debit uses a standard merchant services fee structure consisting of a discount rate (a percentage of the transaction amount) and a fixed fee per transaction. PIN debit fees are typically less than cashless ATM fees for transactions under ~$100.

The default fee structure for PIN debit is for merchants to pay the fees but some providers offer “cash discount” pricing which effectively passes the fees on to customers. If you want to utilize cash discount pricing be sure to understand your local rules related to charging different prices based on how a customer pays.

Some businesses are hesitant to move from customers paying the fees (and businesses often receiving a kickback) to paying merchant processing fees themselves.

However, many of our customers find that the increase in revenue from eliminating customer convenience fees more than offsets merchant processing costs. Other benefits include not needing to constantly explain convenience fees and added goodwill from not charging customer fees.

We have a calculator to analyze the impact of customer convenience fees vs. the business paying merchant processing costs.

Chargebacks

It’s much more difficult for a customer to charge back a PIN debit transaction than a cashless ATM transaction. To charge back a cashless ATM transaction, all a customer needs to do is call their bank and say that they didn’t receive cash for the ATM charge to their account. There is little a merchant can do because the customer’s claim is true; they received marijuana instead of cash.

It’s difficult to charge back a PIN debit transaction because there’s proof that the card was swiped, and that the correct PIN was entered.

Reporting

Another significant benefit of PIN debit over cashless ATMs is how much easier it is to reconcile deposits and sales reports to payment reports. Since PIN debit transactions are not rounded up, reconciling is much simpler.

Choosing a PIN debit provider

It seems everyone is selling cannabis payments these days, so you have lots of choices when choosing PIN debit provider but choose wisely. Cannabis payments are marketed primarily by third-party resellers who typically sell the payment solution they’re integrated with or that pays them the highest commission.

The cannabis cashless ATM debacle is largely attributable to third-party resellers who pushed cashless ATMs over other payment solutions. Cashless ATMs don’t require underwriting (so the sale is fast and easy) and offer high commissions due to the high ATM fee structure.

Below are some things to consider when evaluating PIN debit providers.

Third-party resellers

We recommend working with a provider who has a direct relationship with the processor and financial institution. Reasons to avoid third-party resellers include:

1. Fewer middlemen
2. Fewer cost layers
3. Better support
4. Better transparency and sustainability
5. More knowledgeable about integration capabilities

Some third-party resellers understand payments, and some understand cannabis businesses, but few understand both.

Support

Support can differ significantly between providers, especially if you work with a third-party reseller because there’s an additional layer. Ask what support hours and communication methods a provider offers.

If you are working with a third-party reseller, ask who you should contact for support – if the third-party reseller will be providing support ask what the typical turn-around time is for them to get a response from whomever they’re a reseller for or from the processor/financial institution.

Third-party resellers often use another third party for hardware (payment terminals) support so ask who will be providing hardware support and what their hours and communication methods are.

Integrations

The ability to integrate with most technology providers is a big advantage of PIN debit compared to cashless ATMs. Ask if your POS system can integrate with your payment provider.

Tipping / cash discount

Customers can add a tip to PIN debit transactions. If tipping is something you’re interested in ask what tipping options are available.

Credit card preparedness

If PIN debit underwriting is done properly and the processor and financial institution are prepared, transitioning to credit card processing when it becomes available can be quick. Ask what additional steps, if any, will be required to transition to credit card processing.

Reporting

Ask what type of reports are offered and how they are delivered. Do they offer an online portal where you can access reports? How often are reports updated? Ideally, they provide electronic reports daily and monthly statements.

Online payments

If you want to offer online payments and prefer to have one provider for all your payment needs, ask if your provider also offers ACH payments. Also, ask if they can integrate with your POS and order-ahead services like dutchie.

How to avoid another cashless ATM solution

Cashless ATMs have developed a bad rap so many providers market them as Point of Banking devices or just generically as debit payments. Expect even more name trickery because of the shutdowns.

Regardless of what a payment solution is called, the table below shows some easy ways to determine if it’s a cashless ATM product or PIN debit.