E-commerce entrepreneurship continues to flourish in India but the payment network is literally huffing and puffing to catch up with the business growth. Cash on delivery (COD) evolved as an innovative payment structure in emerging markets like India where even consumers using plastic money are somewhat hesitant to use the same to pay for their online purchases.

However, panellists at Techcircle’s Online Payments & Loyalty Conference, held in Delhi on January 20, pointed out how COD would require a Ctrl+F (read: Refresh) to build itself as a strong complimentary system for online payment.

The panel on Offline Payments Infrastructure brought out the pain points of e-commerce ventures and logistics companies in an interactive session, moderated by Dev Khare, Principal at Lightspeed Venture Partners.

Peyush Bansal, founder & CEO of Valyoo Technologies (the company behind e-commerce portals, and, said that close to half of the total orders served by the company comprise COD payment. “About 30 per cent of the locations where our products are shipped have COD as a payment option; so the opportunity is huge,” he added.

But Bansal pointed out that the courier companies, who are part of the COD network, must address quite a few issues to smoothen the payment system for the vendors. This, in turn, would help ensure a better experience overall and would help build consumer confidence.

According to Percy Avari, country manager of Aramex, a global transportation and logistics services company, one of the biggest challenges concerning COD is the rejection rate as consumers refuse to accept the goods they have ordered.

“On an average, those rejection rates vary between 18 and 20 per cent, and at times, it can be as high as 40 per cent,” he said.

Besides high rejection rates, there is also the issue of security that goes hand in hand with the high churn rate of employees dealing with COD. Avari said the attrition rate of on-ground staff could be as high as 60 per cent.

He also cited another pain point in dealing with cash where the payment collector does not report back after collecting the money. “In such a case, we become liable to the merchant. It’s a big challenge and that’s why an alternative method for collecting payments is required,” he added.

According to Avari, the entire process tends to become more complex and time-consuming when cash transactions increase. So, there should be more convenient options when it comes to doorstep collection. “Next month, we will be bringing credit card (and later debit card) swiping right to your door and that will speed up the transaction process,” he informed.

This will help address the issue where consumers are apprehensive of using their cards online but are more comfortable when the swiping happens in their presence. Moreover, it also does away with the security issues, faced in dealing with cash transactions. On the flip side, this mode of payment can’t help a consumer if he/she is not using plastic money.

Bansal of Valyoo Technologies referred to an alternative system adopted by the company to deal with the issue of low debit/credit card base, as well as the lack of COD infrastructure. “To operate across those low-penetration zones, we have opened accounts in different banks. A customer can deposit the payment there and the product will be shipped. Other payment options can be explored as well, but the bottom line is – if the COD system becomes efficient, no other methods would be required,” he said.

There are others in the ecosystem who have toyed with alternative payment models like cash-before-delivery. Such transaction modes certainly open up new opportunities while tackling some problem areas, but these are by no means foolproof and have their own issues. These are still early days for e-commerce growth in India and COD is here to stay, at least for a considerable time. But it needs to reboot in order to deliver.

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