I examined the true cost of Cash on Delivery (COD) and found that for a standard 1kg parcel delivered within city it can be as high as 26% (of order value) while credit cards and mobile wallets only cost upto 20% and 18%.

Lets examine the main causes 1/6

At the first step at the time of transaction there are no upfront costs to COD, whereas both credit cards and mobile wallets have your standard MDR

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We have to go further than this though by taking into account the logistics costs. COD deliveries are more expensive than standard deliveries. We assume a standard 1kg parcel delivered within city.

This is the primary reason for COD being more expensive than prepayment

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COD delivery orders are notorious for having a higher rejection at doorstep rate. We assume a 5% rejection rate but in practice in can be much higher.

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Finally we look at cash flow implications. Money is deposited within days for prepayment methods, but for COD, the money is deposited at least 2 weeks after a successful delivery. We then have to discount for the time value of money.

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I examine all of these in greater details along with what the industry needs to do to start making a move away from COD in my latest article.

https://dylventures.substack.com/p/the-true-cost-of-cash-on-delivery

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