What Are Cashless ATMs?

Published on March 16 of 2020

What Are Cashless ATMs?

A cashless ATM, otherwise known as point-of-banking technology, is a payment terminal that enables customers to make purchases with a debit card in the same way as they would make an ATM transaction to withdraw cash. The system was originally created as an alternative payment solution to serve high-risk businesses—such as legal medical marijuana dispensaries and certain types of “blacklist” businesses—that typically accept cash as the primary form of payment. Now, a variety of other types of businesses use this method of payment acceptance as well, including lunch trucks and vendors at farmer’s markets, for example.

How Cashless ATM Technology Works

The term “cashless ATM” can be a little confusing because the acronym ATM—or Automated Teller Machine—is usually associated with a free-standing kiosk or machine located within a bank or retail business that dispenses cash. In a traditional ATM transaction, a customer inserts their card into the ATM’s card reader, enters their PIN and the amount they wish to withdraw from their account, and the machine dispenses their cash and a printed receipt that includes the details of the transaction.

By contrast, a cashless ATM system uses a payment terminal similar to a point-of-sale (POS) device to process PIN-based swiped transactions like debit card payments. In this scenario, the customer inserts or swipes their card at the payment terminal and enters their PIN, chooses a type of transaction (in this case, a cash withdrawal), and the dollar amount to debit from their account. The terminal prints a voucher which the customer gives to the merchant confirming that the transfer has been made, and they receive their goods or service. The swiped payment is deposited into the merchant’s account usually within two to three days.

As with a traditional bank ATM machine that dispenses cash in predetermined dollar amounts, the cashless ATM is programmed to process transactions in increments of $10, $20, or whatever amounts are preprogrammed into the terminal up to $1000. If the amount of the purchase is less than the withdrawal amount the customer selects, the merchant provides change to the customer. For example, if the purchase is for $17.20 and the customer selects $20 as the withdrawal amount, the customer receives $2.80 in change. In addition to the voucher, the customer also receives a transaction receipt showing that the transaction was processed as a cash advance.

How Cashless ATM Technology Benefits Merchants and Customers

Cashless ATM systems are especially useful for merchants who cannot get a traditional business bank account—the kind that allows them to accept credit card payments—as well as merchants who are considered high risk because of poor credit status, excessive chargebacks or fraud, PCI non-compliance, illegal activity, and other reasons. But regardless of the type of business, cashless ATM technology does offer many advantages for both merchants and customers alike.

Merchant Benefits:

  • Cashless ATMs are good for merchants who cannot get a traditional merchant account.
  • Merchants can accept PIN-based debit and ATM cards.
  • Merchants can avoid the high rates and fees associated with processing credit card transactions.
  • Card-present PIN-based transactions effectively reduce chargebacks and the risk of fraud.
  • There is no need for on-site ATM cash machines.
  • Cashless ATMs reduce the chance of theft because there is less cash on site.
  • Real-time reporting is available.
  • Funds are typically deposited into the merchant’s account within 48 hours.
  • Since there is no batch processing, transactions are processed in real time.
  • Voucher amounts can be programmed from $5 to $1000 amounts.
  • Merchants can realize additional revenue by charging the customer a convenience fee.
  • Eliminating traditional ATM machines reduces the need for handling large amounts of cash.

Customer Benefits

  • Depending on the vendor they choose, a merchant may be charged a monthly fee for the cashless ATM terminal.
  • For customers, transactions can be done only in fixed increments that are programmed into the payment terminal.
  • Customers are charged an out-of-network bank ATM fee or cash advance fee.
  • Customers may be charged a transaction convenience fee by the merchant.

Disadvantages for Merchants and Customers

No one system is perfect for everyone, of course. There are a few negatives:

  • Depending on the vendor they choose, a merchant may be charged a monthly fee for the cashless ATM terminal.
  • For customers, transactions can be done only in fixed increments that are programmed into the payment terminal.
  • Customers are charged an out-of-network bank ATM fee or cash advance fee.
  • Customers may be charged a transaction convenience fee by the merchant.

As the payment landscape continues to evolve, merchants and customers are looking for ways to make the purchasing process as seamless and as convenient as possible. Considering the benefits that a cashless ATM system can offer higher risk businesses, it may be worth the effort for some merchants to implement this payment processing system.

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