Cash on delivery (COD), once expected to fade as digital payments surged, continues to power a significant share of India’s e-commerce. Industry estimates suggest that close to half of all online orders in the country are still paid for at the doorstep, even as UPI transactions hit record highs. The persistence of COD points to a deeper issue, trust in online commerce has not grown at the same pace as digital payments.
Trust gap keeps COD relevant
For millions of first-time online shoppers, especially in smaller towns and rural areas, paying upfront remains a leap of faith. Many are new to e-commerce and carry concerns about delayed deliveries, incorrect products, or slow refunds.
COD acts as a safety net. It allows buyers to inspect before they pay, reducing perceived risk. In markets where digital familiarity is still evolving, this assurance often makes the difference between completing a purchase and abandoning it.
UPI growth hasn’t changed behaviour
India’s digital payments infrastructure has expanded rapidly, led by UPI. But ease of payment has not automatically translated into willingness to prepay.
The shift from COD to prepaid is gradual and closely tied to experience. Repeat buyers in metro cities are more likely to use digital payments after positive interactions with platforms. But for newer users in Tier-2 and Tier-3 markets, COD continues to dominate.
This suggests that COD is less about payment preference and more about confidence. As trust builds over time, behaviour begins to change.
The cost of convenience
For sellers and platforms, COD comes with operational challenges. Orders paid on delivery often see higher return rates. There are delays in cash remittance, and cases of low-intent or fraudulent orders are more common in certain categories like fashion and electronics.
Despite these issues, removing COD is not a simple option. Brands that have experimented with limiting COD availability have often reported a drop in conversions, particularly in regions where customers depend on it.
COD as a growth lever
Rather than viewing COD purely as a cost centre, many in the industry now see it as a market access tool. It enables businesses to reach customers who are still hesitant about digital commerce but are willing to try online shopping if given flexible payment options.
“COD is not just a payment method, it is often the entry point for first-time online shoppers in India,” said a spokesperson from Shiprocket, India’s largest e-commerce enablement platform. “The challenge for brands is to manage the risks without cutting off access to large segments of demand.”
Smarter ways to manage COD
Companies are increasingly turning to data to reduce the downsides of COD. Risk-based models are being used to decide when to offer COD, based on factors like customer history, location and order value.
Some platforms have introduced measures such as partial upfront payments, buyer verification and stricter return tracking to filter out non-serious orders. These approaches aim to strike a balance, retain the benefits of COD while limiting losses.
“Data-led decision making is helping sellers optimise COD usage. By analysing delivery patterns and return behaviour across pin codes, brands can make more informed choices,” the spokesperson added.
The road ahead
India’s e-commerce market is expected to grow rapidly in the coming years, with much of the expansion coming from non-metro regions. These are also the areas where COD remains widely used. As logistics improves, refund cycles become faster and digital literacy deepens, prepaid orders are likely to rise. But the shift will take time.
For now, COD remains embedded in India’s e-commerce journey, not as a legacy feature, but as a practical response to real consumer concerns. Businesses that recognise this and adapt their strategies accordingly are likely to be better positioned in the next phase of growth.
Trust gap keeps COD relevant
For millions of first-time online shoppers, especially in smaller towns and rural areas, paying upfront remains a leap of faith. Many are new to e-commerce and carry concerns about delayed deliveries, incorrect products, or slow refunds.
COD acts as a safety net. It allows buyers to inspect before they pay, reducing perceived risk. In markets where digital familiarity is still evolving, this assurance often makes the difference between completing a purchase and abandoning it.
UPI growth hasn’t changed behaviour
India’s digital payments infrastructure has expanded rapidly, led by UPI. But ease of payment has not automatically translated into willingness to prepay.
The shift from COD to prepaid is gradual and closely tied to experience. Repeat buyers in metro cities are more likely to use digital payments after positive interactions with platforms. But for newer users in Tier-2 and Tier-3 markets, COD continues to dominate.
This suggests that COD is less about payment preference and more about confidence. As trust builds over time, behaviour begins to change.
The cost of convenience
For sellers and platforms, COD comes with operational challenges. Orders paid on delivery often see higher return rates. There are delays in cash remittance, and cases of low-intent or fraudulent orders are more common in certain categories like fashion and electronics.
Despite these issues, removing COD is not a simple option. Brands that have experimented with limiting COD availability have often reported a drop in conversions, particularly in regions where customers depend on it.
COD as a growth lever
Rather than viewing COD purely as a cost centre, many in the industry now see it as a market access tool. It enables businesses to reach customers who are still hesitant about digital commerce but are willing to try online shopping if given flexible payment options.
“COD is not just a payment method, it is often the entry point for first-time online shoppers in India,” said a spokesperson from Shiprocket, India’s largest e-commerce enablement platform. “The challenge for brands is to manage the risks without cutting off access to large segments of demand.”
Smarter ways to manage COD
Companies are increasingly turning to data to reduce the downsides of COD. Risk-based models are being used to decide when to offer COD, based on factors like customer history, location and order value.
Some platforms have introduced measures such as partial upfront payments, buyer verification and stricter return tracking to filter out non-serious orders. These approaches aim to strike a balance, retain the benefits of COD while limiting losses.
“Data-led decision making is helping sellers optimise COD usage. By analysing delivery patterns and return behaviour across pin codes, brands can make more informed choices,” the spokesperson added.
The road ahead
India’s e-commerce market is expected to grow rapidly in the coming years, with much of the expansion coming from non-metro regions. These are also the areas where COD remains widely used. As logistics improves, refund cycles become faster and digital literacy deepens, prepaid orders are likely to rise. But the shift will take time.
For now, COD remains embedded in India’s e-commerce journey, not as a legacy feature, but as a practical response to real consumer concerns. Businesses that recognise this and adapt their strategies accordingly are likely to be better positioned in the next phase of growth.
