Get All Access for $5/mo

How Adopting Digital Payments On Delivery Can Reduce 'Returns' For Indian Retailers Retailers have tried providing "card on delivery" option by giving mPOS devices to the delivery folks but it has not met with desired success

By Jose Thattil

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Shutterstock.com

Study on demonetization has revealed that the average rate of "returns' for all e-Commerce purchases was 20%. However, when looking only at COD purchases, this rate doubled to 40%. When you consider the various estimates of India's e-Commerce, COD being anywhere from 50 – 80%, the massive scale of the problem becomes apparent.

First, why does COD suffer from such high "return' rates? We can classify the factors affecting "returns' due to COD into "Non-genuine' and "Genuine' categories.

Non-genuine Returns

These include reasons at the buyer-end and cannot really be predicted or easily prevented. These include reasons like:

  1. Buyer was not really committed or had made an impulse purchase.
  2. Buyer dissonance set in after the purchase was completed.

Genuine Returns

These are reasons that are more to do with the process of delivery and largely impact in the so-called "last mile". These include reasons like:

  1. Buyer was not at home after multiple tries.
  2. Buyer did not have the requisite cash at home
  3. Exact change was not available with either the delivery boy or the customer.

Understanding Why "COD"

The good news is the retailers can address all these "genuine' reasons if they so choose. Before we jump to solutions available, it will be noteworthy to understand why these "genuine" shoppers have opted for COD.

Shoppers opt for COD when they are not familiar with the online merchant or feel that if they prepay their orders they will have to pursue the e-tailer or courier agent for delivery. The solution therefore lies in providing payment solutions which allow consumers to pay on delivery

Payment on Delivery Solutions

Retailers have tried providing "card on delivery" option by giving mPOS devices to the delivery folks but it has not met with desired success. The problem is that mPOS devices are still clumsy, expensive, and not intuitively easy for the delivery boy to operate. Network connectivity is still a big issue. Another significant challenge is the reluctance of the customers to hand over their credit card and PIN to the delivery boy as they swipe it and conclude the transaction. This method, of course, still does not address the problem of the customer not being home at the time of delivery.

A Befitting Solution

A promising solution that is finding acceptance is Digital payment on Delivery. The customer receives options to pay on his mobile when the goods are out for delivery. They can make payment using their own card, bank account or wallet and that too on their own phone without sharing either the card or card details with the courier boy. This means the customer need not be physically present to receive delivery after making payment. This reduces the logistics company's burden too as delivery attempts are reduced.

The digital payment environment has developed so rapidly in the last 12 months. Today with retailers accepting UPI and Aadhaar based payments, customers don't even need a card – just a bank account will suffice. Digital payments empower customers to pay using a wide range of instruments — credit cards, debit cards, internet banking, wallets, UPI (BHIM), Aadhaar, BharatQR etc. Customers can use the option that gives them the most benefit in the form of loyalty rewards, cash back, and extended credit period.

This method addresses most of the issues with mPOS-based solutions. A significant challenge that many solutions in the market today struggle with is the last mile notification of payment completion. This sometimes leads to broken payments. Digital payment solutions can address this challenge as well provided they are designed and architected keeping this in mind. Split notifications can be provided to the etailer as well as the courier boy. This relieves the delivery company of a huge challenge of back-end reconciliation.

The evidence seems clear. Providing the customer, a variety of digital payment options on delivery will reduce "returns". Now, isn't that a great reason for the retailers to encourage digital payments?

Jose Thattil

CEO and Co-founder, Phi Commerce

Mr. Jose Thattil is the CEO and Co-founder at Phi Commerce. He is an alumnus of 
Narsee Monjee Institute of Management Studies.

 

Business News

A Former Corporate Lawyer Now Makes Six Figures on YouTube — Here's How She Does It

Here are the secrets to starting and growing a successful YouTube channel, according to a YouTuber with millions of subscribers.

Business Culture

You'll Always Have Anxious Employees if You Don't Follow These 4 Leadership Tactics

Creating a thriving workplace environment hinges on the commitment of company leaders to nurture and inspire their teams.

Marketing

5 SEO Hacks to Help You Rank Fast

Discover the best SEO hacks you can use to rank fast and avoid waiting for months to see results.

Science & Technology

Why We Shouldn't Fear AI in Education (and How to Use It Effectively)

Facing resistance to new technologies in the educational process is nothing new, and AI is no exception. Yet, this powerful tool is set to overcome these challenges and revolutionize education, preparing students and professionals for a future of unparalleled efficiency and personalized learning.

Business News

Y Combinator Helped Launch Reddit, Airbnb and Dropbox. Here's What I Learned From Its Free Startup School.

The famed startup accelerator offers a free course on building a business — and answers five pressing questions for founders.