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Cash on Delivery vs Online Payment


Running a business generally be it online or offline, you need customers to be able to complete transactions. These transactions are made through payment gateways or processes.

These processes or ways of making payments are divided into two. The first of which you make the payment as opposed to when you receive your products at your doorstep or the second way by which you make payment before getting the products.

These processes are called Cash on delivery (COD) or Online payment otherwise delivery versus payment.

This article is aimed at giving you clarity on the subject matter as well as the differences, advantages, and disadvantages of the two.

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Cash on Delivery

If you are into the eCommerce business and online shopping you may be quite familiar with the term cash on delivery (COD). In simple terms, it is a mode of payment where the customer pays by cash or card directly to the courier person or vendor only after the product is delivered. This is considered to be one of the most popular ways of transaction in online buying and selling.

In almost all nations where online businesses have flourished, Cash On Delivery has become a standard payment mode for shopping. Among them, some of the countries are India, Bangladesh, Thailand, China, and so on. So, what makes this mode of payment so accessible, and what makes it free from total disappointment will be at the core of this article.

The common abbreviation when shopping online is COD which stands for cash on delivery. It means that, after you have made your purchase online, you will pay for your purchases to the delivery crew or make an online payment when the purchase lands on the doorstep and before accepting the shipment.

Cash on delivery describes a transaction in which the payment of a good or service is made when the good or service is delivered. Online payment otherwise known as delivery versus payment is a type of transaction that deals with securities in which the cash payment must be made before or during delivery.

Moreso, Cash on delivery (COD) generally deals with goods, and the transaction stipulates that the purchaser must pay for the goods when they are delivered. If the purchaser fails to pay for the goods upon delivery, the goods are returned to the seller.


History of Cash on Delivery (COD)

This concept or means of payment is nothing new. They are popular all over the world ever since the birth of delivery by mail. History has it that the first cash on delivery (COD) originated from Germany way back in 1857 when the first parcels were delivered from people buying goods and services from its neighboring Austria.

In those days, people could place orders for something by sending a letter to the company.


The company then ships the parcel through the postal system. As dated as far back, people would have to pay the postman the cost of their purchases.

Here are some of the reasons for its operation and why people subscribe to it. Firstly, there was a presence of a post office which serves as a trusted medium for cash transactions, since it’s been run by the government of a country. Secondly, it helped overcome the issues of currency exchange. A post office would pay the equivalent of the buyer’s currency to the shipper’s account. Thirdly, Cash on delivery allows companies and businesses to cater to clients at distant locations.

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Online Payment

Online payment otherwise called delivery-versus-payment (DVP) or delivery against payment is a type of transaction that deals with securities. This transaction implies that securities are delivered to a specified recipient only when a payment is made. It is a settlement method to ensure the transfer of securities only occurs when payments are made.

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For example, assume an investor wishes to buy the stock of a company and agrees to the DVP settlement procedure. Therefore, the stock is only delivered if the investor pays the agent before or on receipt of the security.

Delivery-versus-payment is the settlement process from the buyer’s perspective. From the seller’s perspective, this settlement system is called receive versus payment (RVP). DVP/RVP requirements emerged in the aftermath of institutions being banned from paying money for securities before the securities were held in negotiable form.

DVP is also known as delivery against payment (DAP), delivery against cash (DAC), and cash on delivery.


How Do Online Payments Work?

A payment gateway, such as Worldpay, links your website to a payment processing network to secure and authenticate a transaction. It typically comes with additional services such as Pay by Link for email, and virtual terminals allow you to take payments over the phone.


Advantages of Cash on Delivery(COD)


Triumph over currency exchange hurdles

Not every debit card or credit card offers complete and no-brainer international access. This means that the issuing bank will charge a fee when you make a transaction in its currency to pay a foreign seller. Usually, the buyer and seller both lose a little money on such purchases.

This goes to say that, your bank will charge you the rate at which they sell the foreign currency, which is usually higher. The seller’s bank on the other side will pay on their foreign currency buying rate, which is lower.

Cash on delivery helps overcome these losses. You have to pay a certain amount of money in your currency locally to the delivery crew. This means, the bank doesn’t play any role and you don’t lose money for currency conversions. The seller receives the full payments you’ve made, and that’s because it gets credited physically or electronically by the delivery company to their bank account.

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Flexible payment options for the customer

As a customer, one of the most significant benefits of COD is that you can pay only after you get the product in hand. In that way, there is no risk of loss of money. For example, if you pay online beforehand and the seller does not deliver, your hard-earned money gets stuck with the seller. There is no such risk involved when it comes to cash on delivery payments.

The customer can also check the product and see whether everything is perfect before paying for it. In case you find that the product is defective or a different outcome has been delivered, you can always return it without paying.


No dependency on payment cards

Another significant advantage of cash on delivery is that it does not depend on credit or debit cards. This factor is useful in suburban or rural areas where a lot of people do not use cards. The delivery comes, you check the product and pay, and the transaction is complete. It is convenient and straightforward.


No online payment frauds

Security can be maintained in case of cash on delivery. You do not have to divulge any financial information, such as debit card, credit card, or bank account details to the seller. This is one reason why lots of customers prefer Cash on Delivery as the preferred mode of payment.


Disadvantages of Cash on Delivery (COD)

Having discussed some of the advantages when you subscribe to a cash on delivery option, let’s take a look at the disadvantages as well.

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Vulnerable to Losses

One of the challenges with cash on delivery is that it makes the seller vulnerable to losses when the customer returns the product without paying for it. You spend all the money to deliver the product, but ultimately it got replaced. This adds to your revenue loss.

There has been a precedence of fraudulent activities in the case of cash on delivery. As there is no authenticity of the available customer information, the chances of fraud become more.

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Additional Costs

Courier companies charge you an amount when you opt for the cash-on-delivery payment option. Since shifting these costs to your customers can be tricky, most sellers soon feel the burden of these costs.


Advantages of Online Payment

Increased Sales

As internet banking and shopping become more and more popular and it keeps on growing, the number of people making cash payments is decreasing. According to Bankrate, more than two-thirds of consumers carry less than $50 a day, meaning electronic alternatives are increasingly becoming the preferred payment option. As such, e-payment enables businesses to make sales to the customers who choose to pay electronically and gain a competitive advantage over those that only accept traditional methods.

Saves Time

One of the most obvious benefits is that online payments save time. This is true for both your business and the customer.

Your business saves time on administrative tasks when your customers can pay automatically online but it reduces the overall workload that you have to do when collecting payments.

For example, you don’t need to spend so much time on the printing and mailing process if patients can sign up for paperless billing. It also saves your front-end team time if they don’t need to take as many payments over the phone or in the office.


Online payments also save your customer time

They won’t need to call your business line to settle their balance over the phone. They also don’t need to take time writing out a check and going to the post office to buy a stamp and mail the bill.


Reduces Outstanding Days Sales

By saving time on behalf of your team and your customer, you ultimately reduce your outstanding days’ sales. This is the average number of days it takes for you to collect payments for a service. The longer it takes, the less revenue you have for some time.

Between waiting on insurance, sending patients their invoices, and waiting on them to pay, it could take months before you receive what’s due to you. So many factors go into why some practices experience longer follow the outstanding days sales. But one reason has to do with how a customer pays.


Low Risk of Theft

Since online options are more secure, there’s a lower risk of theft. Without statements going through the mail, no one needs to worry that they may get interrupted or sent to the wrong address. This would be a problem whether the business uses cash, check, or fill in their credit or debit card details during the transaction.

Having a paper at your office with these financial details is a risk that someone could steal the customer’s data. If their information ends up stolen, chances are that they’ll switch merchants. 54% of customers would be likely to change providers after a breach of their personal information.


Offers Better Customer Experience

The reason so many people want this digital service is that it provides a better customer experience. Traditional methods just don’t work as well anymore because of what newer generations value in a business. 

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Saving time and money while being more convenient is going to be some of the most important parts of a positive customer experience. Things don’t always go as planned with visits because you can’t control everything. But extra benefits like this one will make people want to stay since it adds value for them.


Track With Real-Time Data

You can quickly track and follow up sales conversation rates on your website and monitor the buy activities when you make a sale or during a product launch all on your live dashboard.

When a customer pays online or through another secure method, you’re able to see details right away through Worldpay’s online dashboard.

Easy access to your daily earnings can help you with your cash flow management and tracking the success of your marketing efforts. It also presents you with an opportunity

If you need to refund a customer or get more information about an order, the information you need can be gathered with just a click of a button.

You can extract reports as to when you need them with online payments. With this report, you can use it to work on your monthly target which gives you greater flexibility. 


Disadvantages of Online Payment

Security Concerns

Although stringent measures such as symmetric encryption are in place to make online payments safe and secure, it is still vulnerable to hacking. Fraudsters, for instance, use phishing attacks to trick unsuspecting users into providing the log-in details of their e-wallets, which they capture and use to access the victims’ personal and financial information. Inadequate authentication also ails Online payment systems.

Without superior identity verification measures like biometrics and facial recognition, anyone can use another person’s cards and e-wallets and get away with it without being caught. These security concerns may make some people reluctant to use online payment systems.


Disputed Transactions

Let’s cite an example here. If someone uses your company’s electronic money without your authorization, you would identify the unfamiliar charge and file a claim with your bank, online payment processor, or credit card company. Without sufficient information about the person who performed the transaction, though, it can be difficult to win the claim and receive a refund.


Increased Business Costs

Online payment systems come with an increased need to protect sensitive financial information stored in a business’s computer systems from unauthorized access. Businesses with an in-house online payment system must incur additional costs in procuring, installing, and maintaining sophisticated payment security technologies.

Read Also: Best 5 Online Payment Gateways for Small Businesses in Nigeria


Having discussed the subject matter, with focus on its meaning, advantages as well as its disadvantages and history. You are now presented with choices of which method is best for your model of business.

Nonetheless, the benefits of Cash on delivery might help improve your overall online shopping experience. Cash on delivery also reduces the risk of online thefts that might occur if you’re very careless while transacting online. To this point, it is advisable you subscribe to pay on delivery.

However, before choosing the cash on delivery option, ensure to read the terms and conditions because some online stores charge a convenience fee for COD purchases. If there’s a charge, try shopping elsewhere at online stores that don’t levy a convenience charge.



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