As stores and restaurants attempt to go cashless, they’re installing “reverse ATMs” that dispense stored-value cards in exchange for greenbacks.
Why it matters: More businesses are eschewing cash — a trend accelerated by the pandemic — but states and cities are passing laws banning them from doing so, in deference to people who don’t have bank accounts or credit cards.
- Handling cash is also a hassle for retailers, with problems including theft and constant runs to the bank.
Driving the news: Reverse ATMs — also known as cash-to-card kiosks — are quickly being installed in all manner of venues that want to go cashless without flouting the law or turning away the “unbanked,” who represent 4.5% of Americans, per the FDIC.
- Amusement parks, casinos and sports stadiums are taking the lead.
- Reverse ATMs have been installed at most Major League Baseball and National Football League ballparks, plus cashless attractions like Hersheypark, Six Flags and many waterparks.
- “Cash digitization” is the term that’s catching on for converting cash to electronic currency — which is increasingly necessary as transit systems and other public accommodations also go cashless.
What they’re saying: “This is a competitive business,” says Naushervan Beg, a partner and business development executive at Wavetec, a Toronto-based company that sells reverse ATMs under the brand name Azimut.
- “Cash carries a lot of friction, right?” he tells Axios. “Many venues are willing to pay for the machines because for them, the bigger pain point is taking the cash.”
How it works: To use a reverse ATM, a customer feeds cash into a machine and gets a prepaid plastic card in return.
- Most of the machines don’t charge fees to buy the card, though some do (typically $5).
- While some cards are venue-specific, generally you get a Visa or Mastercard that may or may not be reloadable.
- When a customer uses the card, the merchant bears the interchange fee charged by Visa and Mastercard — just as they would with any other card under those brands.
Yes, but: Some of the cards carry “dormancy fees,” such as a $3.95 charge if the card isn’t used for more than three months — and it may be hard to use up the card balance if only a small amount is left.
The big picture: Cities including New York, Washington, D.C., San Francisco and Philadelphia require merchants to accept cash — as do states such as New Jersey and Colorado — largely because of the potential harm to consumers who don’t carry plastic.
- The rate of “unbanked” households is highest among communities of color, lower-income earners and those with disabilities, according to the FDIC.
- But the pandemic — which initially got people scared to handle bills and coins — accelerated the migration to electronic payments.