What are the disadvantages of cash on delivery for merchants?
High return-to-origin rates, courier collection fees, delayed cash flow, fake orders and the risks of handling cash. Because a COD order costs the shopper nothing upfront, it is refused or returned far more often than a prepaid order.
In detail
The main disadvantages are high return-to-origin rates, courier collection fees, delayed cash flow, fake orders and the risks of handling cash.
Why returns are higher
A COD order costs the shopper nothing upfront, so it is refused or returned far more often than a prepaid order. Some shoppers order from several stores and accept only one parcel. Others change their mind before delivery. Each refused parcel costs the merchant shipping both ways, handling and tied-up stock.
Cash flow and costs
- The courier collects the money and remits it later, which delays revenue.
- Collection fees add to the cost of each order.
- Reconciling courier remittances with orders takes manual work.
- Cash on the delivery side brings theft and counting errors.
Fraud
Fake orders and prank orders are easier when nothing is paid upfront, and they waste logistics capacity.
What it means for payment operators
Your merchants usually keep COD because some shoppers will not buy without it, but they work to shift customers toward prepaid methods. A platform that offers local alternatives, such as wallets, QR payments and payment links sent before dispatch, helps them do that. Reporting that shows COD next to online payments makes the cost of each channel visible.