Payment on delivery is a form of online shopping in which the buyer doesn’t need to use any credit or debit cards but could just pay cash on delivery. It is unique and beneficial for both the sellers and the buyers because it increases trust between them.
However, there are certain cases where this method may not benefit either party. The pros of pay on delivery are unique and attractive, while the cons of this fantastic e-commerce option are fewer.
This blog will shed some light on such pros and cons to decide for yourself whether to use it or not. So, let’s get started.
Pros of Payment on Delivery
1. Flexible Payment Options for the Customer
With this option, it becomes possible for customers to make purchases without credit or debit cards, which many merchants do not accept due to security concerns. Customers do not need to wait until payday or accumulate credit card bills. Customers can purchase whatever they want, whenever they want, by choosing the best option to make a purchase.
2. No Online Payment Frauds
Pay on delivery prevents scams due to its offline nature since it is not processed through the internet. It reduces the risk of online payment frauds like phishing and identity theft.
For example, a customer purchases a product online, but the seller does not ship it after receiving payment. The customer pays through a credit or debit card and never receives the product or any refund.
3. No Dependency on Payment Cards
Credit and debit cards are often misplaced, lost, stolen, etc. In such cases, customers face difficulties making online payments for their purchases. With pay on delivery, the customer does not depend on payment cards to make the purchase; instead, the entire purchase process is secured by cash.
4. Building Trust
Customers trust sellers when they make payments through cash because it reduces online fraud drastically and increases confidentiality. They are willing to pay more for products if they are assured of their quality, safety, etc.
5. Great Marketing Strategy
The best marketing strategy would be to attract customers by offering discounts. If the seller provides cashback on pay on delivery orders, it becomes an effective marketing strategy to attract more customers.
6. Easy to Compute Transaction Costs
Sellers can easily calculate their costs because they do not need to put in any extra effort to transport the product. The price includes everything, making it easy for sellers to compute transaction costs.
7. Reduce Operating Cost
Pay on delivery is beneficial for merchants because they do not need to invest in any other cash handling services. They do not have to bear the cost of hiring people to collect money from customers, which might be a considerable sum of money daily.
8. Minimize Payment Processing Fees
As the payment is offline, Sellers do not have to pay extra fees for processing the payment. Also, there are no third-party charges involved in making pay on delivery payments.
9. Availability of Options
For a customer, several options are available while choosing a mode of payment, such as cash, debit card, credit card, net banking, cheque, etc. Customers can select the method of payment that best suits their convenience for making a purchase.
10. Growing Trend
Pay on delivery is becoming popular among customers and sellers all over the world due to the benefits offered by this method. It also provides ease of payment for customers since they do not have to make payments before receiving their orders.
Cons of Pay on Delivery
1. Loss of Revenue to the Sellers
Since the customer pays after receiving the product, it is considered a revenue loss to the sellers because they cannot transfer that money into their bank accounts immediately. In that case, the benefit of getting cash inflow at the earliest possible time is not provided to sellers.
2. Extra Courier Charge
Another drawback of payment on delivery is that it requires another courier to deliver the product after receiving payment from customers, which increases the cost of making a purchase. This factor will increase the final price of products, which might not be affordable to some customers.
3. Minimum Transaction Value
The seller sets the minimum transaction value for placing an order through pay on delivery, making it difficult for customers with a lower budget to make purchases in that particular store. Although this process helps sellers filter out fake and potential fraudsters from their customer base.
4. Easy to Cheat
For a seller, managing physical cash and making change is complex. It requires extra effort and time that can be used in other productive activities such as selling products or meeting more customers. Also, this method makes it easier for customers to cheat sellers when fake notes are paid in exchange for products.
5. Need for Courier
The cash-on-delivery method involves using a courier service which increases the cost of transportation and decreases sales margin for merchants because, in such cases, they need to provide discounts to attract customers. This factor can also prevent people from making online orders because many of them do not prefer the cash-on-delivery method due to the above-mentioned reasons.
6. Risk of Fraud
In case a seller doesn’t have prior knowledge about a customer or cannot identify the purchaser during delivery. It might become difficult for them to prevent potential frauds from happening. For this reason, online sellers prefer other payment methods that do not involve payments in cash.
Conclusion
Although payment on delivery method has specific cons, it is still beneficial for both customers and sellers. Some online sellers might refuse to accept this payment method. Others are using it effectively with the help of new technology such as POS (Point of Sale) devices. This device can be connected to smartphones that will allow them to receive payments through quick mobile transactions and online transfers.
In the end, it is up to the seller to decide whether or not they want to use this payment method for their business depending on various factors such as budget, customer preference, and location of their store. In case you choose the pay-on-delivery method, you can sign up to NimbusPost for easy payment processing and one-day COD remittance which facilitates non-stop cash flow.
