LeafLink and Bespoke Financial are making a push into the cannabis payments market as consumer prices rebound from their post-COVID-19 slump.

New York-based LeafLink, which provides marketing and other services to cannabis businesses, processed $5 billion in orders last year. Bespoke, which is headquartered in Los Angeles and provides financing to cannabis business owners, recently announced a partnership to offer customers buy now-pay later financing options.

Cannabis has been legalized for recreational use in 18 states and Washington, D.C. – and approved for medical use in 38 states. The industry hasn’t been the financial bonanza that some fans of the product had hoped. California is a case in point.

After recreational weed was legalized in 2016, the industry was hurt by “complex and confusing regulations, high taxes and decisions by some communities to ban cannabis shops,” according to the Los Angeles Times.

This year, a glut of product has forced retailers to step up discounting as recreational marijuana sales slow and competition rises, according to MJBizDaily.

“Pre-COVID, there was a shortage of supply and pricing went through the roof,” LeafLink CEO Ryan G. Smith said in an interview. “What happened then is people increased their supply," and pricing dropped, he said. “That has obviously had an impact on brands and retailers.”

Industry executives are hopeful prices will rebound. "They are working through that glut and inventory levels are already coming down and we're starting to see the recovery" in the market, Smith said.

His view was echoed by Bespoke CEO George Mancheril. “The product is still moving out the door,” Mancheril said. “Consumers are returning to the dispensaries and, in fact, what you're seeing are the new consumers are actually coming into the market.”

LeafLink services let businesses send and receive compliant ACH payments, allowing retailers to manage their cash flows by eliminating the uncertainty of mailing and clearing checks. Concurrently, sellers can digitize cash collections to lower transaction costs, with LeafLink’s payments service customized to their needs. The company, which has 300 employees, also provides financing and marketing services, with brands listed on LeafLink’s website.

Bespoke this month announced it teamed up with cannabis point-of-sale software company Blaze to offer financing options, including a buy now-pay later service, aimed at dispensaries in California and Massachusetts. Bespoke’s dispensary financing is embedded in Blaze’s POS software for cannabis retailers buying their product from vendors, the companies said in a July 5 release.

“The ability to pay vendors directly from within the Blaze platform via Bespoke’s financing will also minimize dispensaries’ reliance on cash transactions,” the companies said in the release.

Bespoke’s partnership is designed to make it easier for businesses to manage their cash flows, a challenge for an industry whose main product remains illegal under federal law and is shut out of the main credit card processing networks owned by Visa and Mastercard, the company said in a press release.

Dispensaries wanted credit to make timely payments to vendors, the companies said. When they couldn’t meet suppliers’ demands for cash on delivery, all too often they were forced to consider carrying limited inventory reserves if they wanted to invest in new product purchases.

The CEOs of LeafLink and Bespoke said they expect annual U.S. retail sales market for weed to reach $100 billion by 2030. Meanwhile, they're predicting the wholesale market to expand to $60 billion over that period, a 10-fold increase from its current $6 billion value.

Bespoke has financed about $800 million in gross merchandise volume, and is on track to deploy $1 billion by the end of 2022. It only provides financing to experienced cannabis operators.

“Cannabis is a very state-by-state market with its own regulation,” Mancheril said in discussing how the company determines where to expand. “So for us, it's more a question of, is there enough of an opportunity for us.”

By Jonathan Berr on July 8, 2022
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