Cash on Delivery (COD): Definition & Overview

KEY TAKEAWAYS

• Cash on Delivery is a convenient payment option for businesses.
• Many customers prefer COD due to its ease of use and security.
• About 15% of online shoppers use Cash on Delivery.

What Is Cash on Delivery?

Once upon a time, most online purchases made by customers were via a credit card. They’d enter their payment details, and the bank would take a cut, usually around 1-2% of the purchase price.

This is, of course, less of an issue for purchases that cost more than $100. But it does mean that demand for money transfer services like Western Union and MoneyGram is often high in particular markets.

For example, countries with expensive domestic currencies like Japan and Korea. Cash on Delivery, or COD, is a payment method that enables customers to pay for their purchases with a specific payment method and address.

It’s similar to standard checkout, but instead of providing a payment page, the merchant accepts payments by COD. It’s similar to standard checkout, but instead of providing a payment page, the merchant accepts payments by COD.

This makes it easier for customers to purchase products from merchants they don’t know. It also requires them to notify the merchant of their payment details upfront rather than during checkout.

This allows for better transparency between the buyer and seller. And it’s one of the reasons why CODs appeal to consumers.

How to Take Payments with Cash on Delivery

To accept payments by COD, you’ll need a payment service provider (PSP) and a payment gateway. A PSP acts as an intermediary. It connects your online store to payment gateways, which are the specific platforms that allow customers to pay for products with COD.

As with standard online payments, you can accept payments from customers via COD using a standalone payment gateway or a payment app. In either case, you’ll need to configure your payment service provider (PSP) to accept COD payments. This can be done via the settings of your payment gateway or PSP.

How Does Cash on Delivery Work?

Like standard checkout, the customer enters their form of payment details and selects a method of payment. The customer then chooses an address where they want the merchant to ship the product.

The merchant then accepts the payment and ships the product to the address provided. The customer then pays at the time of delivery.

When to Use Cash on Delivery

Cash on Delivery works best for services or products that can be delivered to the address specified in the purchase order.

For example, you could sell food or other consumables that are fresh and perishable. Or you could ship digital products like e-books or software that the consumer must download. In both of these cases, the products are typically consumed at home.

The address where the goods are consumed isn’t necessarily the address that makes the purchase. This type of transaction is best for these goods. 

How to Set Up Cash on Delivery

As with standard checkout, the first step when setting up COD is to create a product listing. In the product details, select the “Payment” option and enable “Cash on Delivery.”

You’ll also need to provide a return address and a shipping address, as you would for standard checkout. Please note that shipping return fees apply.

As with standard checkout, you can only use Cash on Delivery with items that are eligible for the service. If you make a mistake, you can always remove the option from your listings.

Key Things to Remember When Using Cash on Delivery

There are a few important things to keep in mind if you’re going to use COD. For example:

• Customers can only pay using a Cash on Delivery method if they live at the address that you’re using for COD.
• Customers can also only pay using a COD method if the address they’re using is valid and belongs to someone who lives there.
• You don’t need to accept COD payments if your business model doesn’t allow it. However, you should note that only around 15% of shoppers opt for COD when shopping online.
• COD payments have lower risks of buyer identity fraud or mistaken identities.
• Tracking solutions let you keep an eye on the shipping process.
• There are fewer buyer risks, thus boosting consumer confidence.

Summary

Cash on Delivery can ensure a smooth transaction. Moreover, it promotes better customer service in businesses. If you’re looking for a payment method that is safe and secure, consider COD.