In the current Indian eCommerce market, Cash on Delivery is one of the most popular payment methods. Millions of users use it to buy items online. According to a recent study, 23% of consumers see COD as a critical factor influencing their buying decisions.Â
With time, the demand for cash on delivery increases multi-fold despite advancements in technology and other prepaid payment options.Â
In this article, we’ll explain more about Cash on delivery, how it operates, and when it’s a practical choice for your business. For those already providing COD options, we’ll also offer some important tips to optimize the overall process and increase efficiency.
What is Cash on Delivery?
Cash on Delivery also known as Collect on Delivery is a popular payment method for online purchases by customers. In this, they pay for goods at the time of delivery rather than making any advance payment. Although traditionally associated with cash payments, COD can also involve checks or electronic payment methods like UPI or cards.
For example, sales representatives can accept card payments in the field using mobile card machines. Even though the payment is digital, the immediate payment upon receiving goods qualifies it as a CoD transaction.
How Does Cash on Delivery Work for Sellers in Ecommerce?
In the Ecommerce industry, all the key cash-on-delivery (COD) terms and conditions are pre-specified in the initial purchase agreement with the supplier. In this, when a customer places an order (either online or offline)- they choose the payment option as ‘cash on delivery’.
After successful delivery, the customer pays the due amount, usually to a shipping or logistics partner working on behalf of the supplier. After deducting handling charges, the logistics partner transfers the funds to the supplier. Even though CoD customers don’t use credit, suppliers still need to generate invoices, which are often attached to deliveries as printed documents like invoices or shipping labels.
From a seller’s perspective, CoD introduces unique challenges depending on the payment method used:
Cash Payments: Sellers must wait for their fulfillment partners to deposit the collected cash, often minus collection fees.
Checks: Sellers are responsible for physically collecting and depositing checks at bank branches.
Digital Payments: Sellers may face delays while waiting for payments to clear after processing fees are deducted.
Which Industries Benefit the Most from Cash on Delivery?
Certain industries find key value in providing cash on delivery (CoD) to their customers:
Retailers: Retail businesses, including those selling household goods or food, rely on CoD to collect payments directly at the time of delivery. Food delivery services also benefit, particularly for first-time customers who may prefer to pay only upon receiving their orders.
eCommerce: CoD helps new distributors, manufacturers, and eCommerce platforms build trust with first-time buyers. After providing this type of payment option, they can stand out in markets and address customer concerns.
Wholesalers: In the B2B space, wholesalers take care of those businesses that have limited or poor credit by providing CoD as a payment option. This enables smoother transactions without the need for credit approvals.
Emerging Trends in Cash on Delivery
CoD continues to adapt to modern payment and delivery practices. Key trends include:
Digital Integration: CoD is increasingly incorporating mobile wallets, crypto payments and eCommerce payment options (Amazon Pay), blending traditional methods with digital convenience.
Enhanced Security: To combat fraud, many CoD transactions now require secure authentication such as on-delivery one-time passwords (OTPs) or biometric scans.
Mobile Check Deposit: Delivery personnel can now instantly process checks using mobile apps. It further simplifies the payment collection process for both businesses and customers.
