Back in the day, you would find local markets swarming with shoppers. Shopping for special occasions meant waiting in line for hours to get what you wanted. Fast forward to recent times, and e-commerce colloquially referred to as “online shopping,” has changed customers’ buying behavior.
Online shopping has become more accessible to customers, thanks to smartphones and the Internet. Whether we shop online or offline, our preference for cash payments in times when digital payments have become a norm still prevails
The e-commerce industry is evolving, resulting in unprecedented growth toward the $200 billion mark by 2027. With this growth, the Cash on Delivery or COD orders have also seen an uptrend. If you want to take your business online, you must understand why COD is so popular and the recent developments related to it.
What is Cash on Delivery?
COD, also known as “Cash on Delivery” or “Cash on Demand,” is a payment method in which a customer purchases a product online but chooses to pay for it at the time of delivery rather than in advance.
The name comes from the fact that most customers prefer to pay cash for their purchases. There are different methods through which customers can complete the COD payment, i.e., by paying cash to the delivery agent or using digital wallets or credit/debit cards to complete payment.
Why is COD Preferred in e-Commerce Transactions?
There are unlimited payment options such as UPI, credit cards, debit cards, digital wallets, and more. Yet, Cash on Delivery is the most popular payment option and accounts for 17% of total online purchases in India. The reasons could be:
- Cases of Fraud and the Legitimacy of Businesses: Although online payments for e-commerce transactions are easier and beneficial for businesses, most customers still prefer COD. Customers cannot trust the legitimacy of online stores, especially the new ones. The risk of online scams is increasing day by day.
- Payment Gateway or Internet Issues: Customers often prefer Cash on Delivery as it is easy. Offline payments do not carry the risk of money getting debited from the bank account but payment not being completed due to gateway issues. Sometimes payments are not processed due to internet connectivity issues.
- Security Issues: Online payments are riskier due to security concerns about data privacy. Customer data, when stolen, can be very harmful to both the business and the customer.
- Familiarity with Cash Payments: In underbanked places or areas with lesser digital and financial penetration, people are familiar with cash payments. They may not find online payments as easy and convenient as cash transactions.
How is COD an Inconvenience to Online Businesses?
Despite all the convenience of COD payments to customers, COD is often an inconvenience to online businesses.
- Cash Flow Issues: The businesses are skewed in cash flows, and COD further restricts money for the business.
- Returns and Cancellations: When a COD order is placed, the customer does not lose anything until payment is made to the delivery agent. Hence, COD orders have the largest number of returns and cancellations orders.
- Processing Refunds can be extremely challenging: Return of products and refunds is challenging as no bank details were provided while making purchases. Hence, a refund of COD requires a lot of back-and-forth communication between the buyer and the seller.
The most standard process for a COD refund across e-commerce is:
- Once the customer requests a refund, a pick-up address for the product must be provided
- A delivery partner is sent to pick up the product
- Once the product is picked up, the team reaches out to the customer on their email address, requesting the customer to provide bank details and other necessary information for the process of refunds
- In cases where the customer’s email address is unavailable, the business has to reach out to the customer over a phone call to collect payment details
Moreover, the COD refund process takes a minimum of 7–10 business days if there is regular communication between the business and the customer. The refund process gets delayed further if communication does not run smoothly.
Keeping in mind all these inconveniences to the businesses and the customer’s fear of COD refunds, Cashgram was introduced by Cashfree Payments to the process of COD refunds. This ensures that the customers are not worried about delayed returns, and businesses need not spend unnecessary time and resources to process these COD refunds.
How Cashgram helps fast-track the process of COD refunds?
You can make refunds even if only the phone numbers and email ids of the customers are unknown. Using Cashgram, a payout link is sent directly to the customers who have requested COD refunds. This link collects all the necessary information that is required to be provided by the customer for refunds. It verifies the bank details and helps in processing refunds almost instantly.
How Does Cashgram Work?
Cashgram is a no-code solution.
Business-side action:
- In the Cashfree Payments dashboard, the Cashgram option is available
- The business should create a Cashgram or payout link and send the link to a customer’s email or registered mobile number. The customer should enter the necessary account details (bank account, UPI, Paytm, Amazon Pay) and submit the link
- The refund or payout will be sent to the preferred account as entered in Step 2
Customer-side action:
- Access the link sent by the business to your email ID or registered mobile number
- The link displays several payment methods like the bank account for fund transfer, UPI, Paytm, or Amazon Pay wallet for the customer to choose
- Once the desired payment method is selected, enter the required details. Example – enter your bank account details for inter-bank money transfer or enter your UPI registered number for receiving refunds via UPI
- Verify through OTP sent to the registered mobile number
- Post validation, the specified amount will get credited to the account as selected in Step 3
Cashgram allows businesses to process customer refunds through bank transfers, UPI, or other digital wallets.
What are the Benefits of Using Cashgram?
- Savings in Resources and hence Savings in Operational Costs
Cashgram is a one-time communication with the customer. Once the merchant sends the link and communicates it to the customer, the customer gathers all relevant data in one place. It will save repeated follow-ups by businesses from customers seeking refunds.
- Directly Linked to Banks and Digital Wallets
Cashgram has exclusive partnerships with other digital wallets. So, once you create the link, the customer automatically receives a notification. If there are many requests to process refunds, bulk creation is possible through a simple upload.
- High Success Rates
Since it is easier for customers to link their accounts to receive a refund, the success rate for responses is high.
- Faster Refund of the Process
On Cashless Payments, Cash-On-Demand refunds are almost instant. In the traditional model, refunds took about 10–15 business days.
- Reduction in Manual Errors and Wrong Process of Refunds
As business entities do not manually enter bank details, manual errors get reduced significantly. The verification also takes place when linking UPI and digital wallets.
