By Ruhi Soni
(Reuters) - Fintech firm Bespoke Financial is looking to expand its 'buy now pay later' service for cannabis businesses in California and Massachusetts later this year, its Chief Executive George Mancheril said on Thursday.
The push comes after a successful pilot launch in July that allowed cannabis retail outlets to buy products from producers using the service that allows them to pay back after its sale.
The service that uses partner point-of-sales firm Blaze's software is coming to the weed sector struggling to get funds from banks as it is classified as illegal under federal rules.
Amid slow banking and legal reforms, the sector is going through a downturn, with marijuana stocks losing nearly 80% of their value from their high in February last year.
"Cannabis has always been its own microcosm, where because of federal illegality we have less access to capital relative to other industries," Mancheril said in an interview with Reuters.
The plan by Bespoke and Blaze also comes at a stormy time for other BNPL firms as their valuations take a hit from spiraling inflation that has slowed consumer spending.
The two fintech firms believe their service can sidestep such worries as they tap into larger fees from companies, especially the niche cannabis industry, rather than consumers.
"With B2B, there's a way to actually underwrite risk and to measure risk, in a way that's much more difficult than on the consumer level," Mancheril said.
The sector's financing hurdles is a boon for Bespoke as there is no competition from larger BNPL firms, said Karan Wadhera, managing partner at Casa Verde Capital, a venture capital firm that funds cannabis startups including Bespoke.
"We're not seeing Affirm or Klarna, and definitely not Apple (NASDAQ:AAPL) come into our space anytime soon."