What each method means for operations
Prepaid orders are cleanest: confirmed, paid and easier to ship. COD widens your audience but adds collection, reconciliation and refusal risk. BNPL shifts credit risk to a provider and usually behaves like prepaid for shipping.
Cards, mada and wallets such as Apple Pay settle through your payment provider on its own schedule, and the order is paid before it ships. Buy-now-pay-later services such as Tabby or Tamara pay you and carry the credit risk, so for shipping purposes they behave like prepaid. COD is the only method where the courier handles cash and where the money reaches you after delivery.
The real cost of COD
COD looks free because the customer pays nothing extra, but the costs show up elsewhere. Adding them up is the first step to deciding how much effort COD deserves.
- Collection fees charged by the courier
- Delay between delivery and the money reaching you
- Refusals and the return shipping that follows
- Time spent confirming orders and reconciling cash
- Working capital tied up while cash is in transit
Keep COD, but make it cheaper to run
Offer COD where customers expect it, and add confirmation calls or messages for larger orders. Nudge buyers to prepaid with a small incentive rather than removing COD entirely.
Confirmation does not need to be heavy. A short automatic message asking the customer to confirm the order and the address gives you a response rate you can measure. Keep phone calls for high-value orders and for customers with a history of refusals.
- Confirm higher-value COD orders
- Track refusal rate by payment method
- Settle COD into a wallet you can use
Design a checkout that favours prepaid
The way payment methods are presented shapes the choice. You can make prepaid the easy path without hiding COD.
- List the methods your customers use most, such as mada and Apple Pay, first.
- State a real benefit of prepaying, such as a small discount or priority dispatch.
- Keep the prepaid flow short, with saved cards and one-tap wallets.
- Show buy-now-pay-later options for larger baskets where they fit.
Decide where COD should be limited
Limits work best when they come from data, not suspicion. If a particular area, product type or order value shows a consistently higher refusal rate, you can ask for prepayment or a deposit there while leaving COD open elsewhere.
Explain the reason plainly at checkout. A short sentence such as “prepayment is required for this order value” is better received than an unexplained missing option.
Treat refusals as a data problem
A refusal is not just a lost sale; it is a signal. Record the reason and group refusals by product, city, price band and payment method. Patterns usually appear quickly: one product that looks different in person, one city with weak delivery windows, one price band where buyers change their mind.
Reconcile by payment type
Your ledger should separate COD collected by couriers from online payments already in your account. Mixing them hides the cash that is still in transit.
Add a payment-method column to every report and look at failed deliveries, returns and days to cash separately for COD and prepaid. The gap between them is the true cost of offering COD, and it tells you how large an incentive for prepaid you can afford.
Buy now, pay later and shipping
A BNPL order is already paid when it reaches you, so it ships like prepaid. The operational question is what happens afterwards: if a customer returns the item, the provider usually needs to be told so the instalments are adjusted.
- Mark BNPL orders with their own payment type in your reports.
- Ship them as you would any prepaid order.
- When a return arrives, notify the provider and issue the refund through them.
- Keep the provider's reference on the order so the return is easy to match.
Change one thing at a time
Payment mix is sensitive. If you change the discount, the order of methods and the confirmation rule in the same week, you will not know which one moved the numbers. A slow, measured approach finds what works for your customers.
- Record a baseline: share of COD orders, refusal rate and average days to cash.
- Change one element, such as the prepaid incentive, for a few weeks.
- Compare conversion, COD share and margin with the baseline.
- Keep the change only if profit per order improves, then move to the next element.