IADs and ISOs: Take the Test - March 16, 2023

IADs and ISOs: Take the Test

Thursday, March 16, 2023

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by David Tente

All IADs and ISOs who provide merchant services should spend a couple of minutes to take the “Cashless ATMs” test below. Although it may take a bit of legwork to determine some answers, there are only six questions.

               Do any of your merchants use a terminal on an ATM network that:

  • generates more than 50 transactions per day?
  • does no balance inquiries?
  • has withdrawal denominations of only $1 or $5?
  • has no device faults, such as receipt printer or dispenser faults?
  • assesses a lower than average surcharge (<$3.00)?
  • has ATM cash load transactions that change on odd intervals?

If you answered ‘Yes’ to even a few of those questions, you probably have merchants using scrip terminals – which are sometimes referred to as “cashless ATMs” or Point of Banking (POB) devices –  operating as ATMs. ATMIA hosted a panel discussion on this topic at the annual conference last month.  And it was a very well-attended session.

These devices turn the interchange model upside down. Merchants are required to pay interchange for retail point of sale transactions. Scrip terminals programmed in this way turn the retail payment transaction into an ATM withdrawal transaction, for which the merchant receives interchange. And a legitimate ATM operator is often deprived of a legitimate withdrawal transaction.

Literally tens of thousands of these terminals have been shut down over the past year. Such devices are prohibited by network rules. Violators can be subject to fines as high as $50,000 per transaction, per device. Unscrupulous system providers have gotten very good at disguising this activity, but eventually get caught.

For merchants and their service providers, the risk is not just the potential for hefty fines. They can have their payment services suddenly shut down, without warning, in the middle of a busy day. And face the challenge of quickly replacing them with legitimate options.

Unfortunately, there are some IADs and ISOs – and their merchants – that have no idea they are deploying an illegitimate system. If you suspect that such devices are being used in any of your locations, contact your processor, network partners, or sponsor bank for advice on how to proceed.

Awareness of this issue is growing, but your assistance is needed to irradicate these devices altogether.

Best regards to all,

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