Cash on Delivery (COD) or Payment on Delivery (POD) has been and still is one of the go-to payment option for millions of people buying things online.

You place an order, a rider or delivery personnel shows up, you hand them cash or pay by other means, and that’s it. Just “see the goods, pay on the spot.”

But behind that simplicity are real logistics headaches, risks, and tough choices for businesses.

Illustration of cash on delivery


What is Cash on Delivery?

Cash on Delivery (COD) or Payment on delivery is a payment method where the customer pays for a product only when it arrives at their doorstep.

That payment could be in:
  • Physical cash (still common in many cities)
  • POS (if the rider carries a terminal)
  • Bank transfer (done on the spot)

Until payment is made, the product still legally “belongs” to the vendor or delivery company. If the customer refuses the item or isn’t available, the item is returned.



Why Cash On Delivery Became Popular (Especially in Developing Markets)

If you’re selling online in countries like Nigeria, Ghana, or Kenya, you can’t ignore Cash on Delivery.

It’s a trust builder.

Here’s why it took off:


1. Low Trust in Online Payments

For years, people have been told “Don’t send money to strangers online”.

Bank scams, fake vendors, and orders that they never received has made many customers cautious. Cash on delivery feels safer: “I’ll only pay if it shows up at my door.”


2. Unreliable Banking & Internet

In markets where bank transfers can be delayed and card payments fail mid-transaction, Cash feels more dependable.

Even in big cities, poor networks can stop a payment from going through, but cash works anywhere.


3. Cultural Buying Habits

Before e-commerce, local markets were the norm — you inspect what you’re buying before parting with your money. Cash on delivery mimics that experience.


4. Impulse Buying on Social Media

When someone sees a Facebook or Instagram ad for a product they’ve never tried, they’re more likely to order if they can pay at delivery.

It lowers the perceived risk of “losing money to a fake vendor.”


Bottom line: COD thrives because it meets customers where they are, sometimes offline, or just cautious of sending money before seeing the goods.


How the Cash on Delivery Process Actually Works

On the surface, COD looks like:

“Customer orders. Rider delivers. Customer pays.”

But in reality, it’s a chain of small but critical steps. Here's how the cash on delivery process flows:


Step 1 — Order Confirmation

Once the order is received, the seller confirms:
  • Product availability
  • Delivery location
  • Payment type (cash, POS, or transfer on delivery)

Step 2 — Package & Label

The seller or Fulfimnet service prepares the product:
  • Secure packaging (especially for fragile or perishable goods)
  • Clear labeling with the customer’s details
  • Payment terms (“COD – Amount”) marked for the rider or delivery agent


Step 3 — Assigning a Rider or Delivery agent

Find a reliable courier or delivery agent to pick up the package and deliver fast


Step 4 — Delivery Attempt

The rider or delivery agent travels to the customer’s location.

Upon arrival:
  • The customer inspects the goods.
  • If satisfied, they pay in cash, via POS, or bank transfer.
  • If they refuse, the package is marked as “failed delivery” and returned.


Step 5 — Cash Remittance

At the end, the rider, delivery personnel or fulfilment provider remits collected payments to the seller, depending on the arrangement.


Note: The entire COD process relies on Speed:

The faster the delivery, the higher the payment success rate. Delay kills urgency and customers who wait too long are more likely to reject the order.


Benefits & Advantages of Cash on Delivery for Businesses & Customers

For Businesses (The Seller)

1. Reaches More Customers

It opens your doors to buyers who don’t use cards or don’t trust paying online.

2. Boosts First-Time Orders

New customers are more likely to try your product if they can pay only after receiving it.

3. Mimics the In-Store Experience

Cash on Delivery allows customers to inspect goods before paying, similar to a physical shop.

4. Competitive Advantage in Some Markets

In regions where competitors don’t offer COD, it can set your store apart.


For Customers (The Buyer)

1. Risk-Free Shopping

You only part with your money after seeing the product.

2. Flexibility in Payment Method

Depending on the seller, payment can be cash, card, or transfer — but only at the point of delivery.

3. No Need for Online Payment Setup

Customers without active online banking or cards can still buy.

4. Trust & Assurance

Especially for high-value or fragile items, COD provides peace of mind.



The Downsides & Risks of COD (and How Businesses Can Minimize Them)

While Cash on delivery can boost sales, it also comes with headaches that many new vendors and businesses underestimate. It opens doors to cash on delivery scams, unserious customers, bad actors and more. Here's how to handle them;

1. Failed Deliveries

A customer can simply refuse to pay when the order arrives; maybe they changed their mind, found it cheaper elsewhere, or just weren’t serious when ordering.

Impact: The seller loses both time and delivery costs.

💡 Minimize it by:
  • Calling or messaging customers to confirm orders before shipping.
  • Requiring a small deposit for high-value orders.

2. High Returns Costs

When an order comes back unpaid, you still absorb delivery and return fees.

💡 Minimize it by:
  • Limiting COD to certain product categories.

3. Cash Handling Risks

Riders or delivery staff carrying large amounts of cash can face security threats.
Even in safe areas, handling cash adds counting errors and reconciliation delays.

💡 Minimize it by:
  • Encouraging card or transfer on delivery.
  • Setting cash collection limits per delivery.

4. Delayed Cash Flow

With COD, payment isn’t instant. If delivery takes days and returns happen, your cash flow can slow down.

💡 Minimize it by:
  • Tracking COD performance and reducing it for unreliable areas.
  • Offering prepaid incentives to loyal customers.



When and How To Offer COD in Today’s Market

Even as more businesses push for prepaid orders, Cash on delivery still has a place, but it works best in specific situations.

1. First-Time Customers

When someone is ordering from you for the first time, Payment on delivery can lower their hesitation. If they like the experience, they may switch to prepaid next time.

2. Lower-Ticket Items

For items under a certain value (e.g., under $20 or ₦20,000), Cash on delivery can be worth the risk. The loss from a small failed delivery is easier to absorb.

3. Areas with Low Digital Payment Adoption

In some regions, digital banking penetration is still low. COD can be the only way to reach these customers.


In Conclusion: Use Cash On Delivery Wisely

Cash on Delivery is neither a relic of the past nor the perfect solution for every sale.
It’s simply a tool, powerful when it builds trust and closes more orders, but costly when mismanaged.

The businesses winning with COD today:
  • Use it selectively, not as the default for everyone.
  • Track performance and cut it where it bleeds money.
  • Combine it with faster, more reliable delivery to reduce cancellations.

For customers, Paying on delivery remains a safety net. For sellers, it’s a bridge, one that can connect first-time buyers to long-term loyalty if handled well.

Quiz
Quick Check: Cash on Delivery (COD)
Question 1 of 8Score: 0
Which best defines Cash on Delivery (COD)?
What is a common risk with COD for merchants?
Which practice reduces COD failed deliveries the most?
When is it smartest to avoid COD or require a deposit?
Which fees may apply on a COD delivery compared to prepaid?
What improves COD cash reconciliation & reduces disputes?
Which policy helps control COD risk during peak demand?
What is a simple hedge for first-time COD customers with low trust signals?
Tap an option to check your answer.