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Why I Went From Card To COD

I’ve been shopping online since circa 1998 but, over the years, the following factors have taken the shine off my initial enthusiasm for ecommerce in India:

  • Driven by VCs braying for profits, many ecommerce players in India have moved from the traditional inventory model to the asset-light marketplace alternative. Based on my exposure to this model on eBay India, I tend to believe that it poses an intrinsic delivery risk (more in the post titled A Tale of Two Sites on my personal blog)
  • Online credit card payments have become very painful as a result of overzealous security measures like two factor authentication and Mobile OTP.

As a result, I’ve become somewhat partial to brick-and-mortar stores during the past 2-3 years.

However, a combination of stock outs and store closures drove me back to ecommerce recently (See Retail Is Barking Up The Wrong Tree Against Ecommerce on my company blog for more on that).

This coincided with the entry of Amazon to India. My consistently good experience with the ecommerce giant in Germany, UK and USA for over 10 years prompted me to check out Amazon India. I quickly noticed that, while Amazon stocks its own inventory in its overseas operations, it adopted the marketplace model from Day One in India.

As I said earlier, I’ve been cagey about online marketplaces ever since my bad experience with eBay India.

But I found out that, while the items on Amazon India were listed under the name of third party sellers, Amazon handled the logistics by itself. This was reassuring since many of the ills of the marketplace model could be traced back to the sad state of logistics in India (See Will The Sad State Of Logistics Hurt Indian eCommerce? on my company blog for more on this topic).

Then, I also found that Amazon India offered Cash on Delivery, a payment type not offered by Amazon in any other country where I’ve patronized it.

Accounting for over 60% of ecommerce volume in India, COD eliminates the friction of using credit cards online. Moreover, by letting me pay only upon receipt of goods, COD kept me insulated from disputes, if any, between the merchant and Amazon that came in the way of fulfillment of my order. Even in the worst case, if I didn’t get my order, I didn’t pay.

So, despite its marketplace risk, I took shelter in COD and went ahead and placed three orders on Amazon India.

I’m not regretting my decision.

I got all my consignments on time or slightly earlier than the promised 4-6 business days. This is not surprising considering COD would put a natural pressure on merchants to deliver earlier so that they can collect their money faster.

COD has proved to be better equipped than card to solve a key problem arising from the shift in ecommerce from inventory to marketplace model.  

Just another experience that reinforces my long-held belief that the move between cash and cashless methods of payments is not always unidirectional.

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Comments: (8)

A Finextra member
A Finextra member 20 January, 2015, 10:36Be the first to give this comment the thumbs up 0 likes

Thanks for this interesting article. Couple of e-commerce observations which stand out are :

1) Asset inventory model scores over the marketplace model.  

2) COD (Cash on Delivery) mode of payment is a must to grow the market in LDC's and developing economies and for the brand to gain credibility in the customer's mindspace. 

To Amazon's credit, while embracing the marketplace model, they have retained control of logistics, are experimenting with it and trying to make the experience continuously better.  Also, for a sensitive market like India, diferentiating by allowing the flexibility of COD (unheard of in other Amazon markets) has both enabled and endeared the name to (Indian) customers. As an amazon customer in India, I can vouch that their commitments are well kept !

Needles to say, Jeff Bezos and team are making smart inroads (by Truck or toehrwise) in Indian (e-commerce) hinterland ! 

A Finextra member
A Finextra member 20 January, 2015, 12:41Be the first to give this comment the thumbs up 0 likes

Cash-on-delivery brings a "peace of mind" factor to some, but is not without issues:

- It does not mitigate risk from dispute between you and the merchant which arising from delivery of defective or mismatched goods. The risk is equal with credit card purchases. Infact, charging to credit card account adds another safety net over the purchase.

- Needless to say, it is inconvinient for high value purchases. Many buyers may not be able to or uncomfortable paying large sums in cash, thus negating its reason to consider it in the first place.

- Robs the buyer the opportunity to avail incentives/benefits provided by the card provided.

A Finextra member
A Finextra member 20 January, 2015, 13:26Be the first to give this comment the thumbs up 0 likes

Dear Aditya, thank you for your comments. My replies as below.

- The simple expedient of opening the package at the time of delivery will help ascertain if the goods is mismatched or (apparently) defective. Charging to your CC account renders you vulnerable with no such verification (of goods) possible.

- Agree to your point in principle. But then, how many such purchases will be high value in nature ? Moreover, how do you define high value ?

- True. If one is a slave to loyalty points / bonuses, cash on delivery is absolutely infra dignitation !

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 20 January, 2015, 16:49Be the first to give this comment the thumbs up 0 likes

@ShoumitB & @AdityaG:

TY for your comments.

  1. You're right about COD not helping in the context of merchant disputes re. defective goods. In fact, I've addressed this point in a slightly different version of this post on my company blog: "As for receiving the wrong or defective item, it already happened with one of my three orders. COD can’t eliminate this clear and present danger with the marketplace model. That said, Amazon India’s simple and fair returns policy substantially mitigates this risk." 
  2. I've since then heard from a couple of regular customers of Amazon India that Amazon's couriers actually let customers open the carton and inspect the contents before insisting upon the payment. I've never heard of such a practice with COD anywhere. If it's true, it's one more mitigant against this risk. 
  3. I've been a heavy user of credit card ever since I got my first credit card in the late 80s. One main reason: Reward points! Cash on Delivery is definitely a problem in that context - or so I thought until today. I received the delivery notification from Flipkart for one of my recent orders earlier today and was thrilled to learn that the company now accepts Card on Delivery! So, I'm back to cards and reward points!
  4. Card on Delivery eliminates the problem with Cash on Delivery for high value purchases.
Abhishek Chatterjee
Abhishek Chatterjee - Gartner Inc. - London 25 January, 2015, 15:43Be the first to give this comment the thumbs up 0 likes

by the way what is stopping to pay by card at the point of delivery.. if the delivery boy comes with a swiping machine or a mobile wallet payment receiving machine.. i would see no reason for cash payment. specially current indian govn push to maKe all unbanked population bankable. adoption of smart phone with drive commerce.. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 25 January, 2015, 16:18Be the first to give this comment the thumbs up 0 likes


Nothing. I've referred to the Card on Delivery in #3 & #4 of my last comment. However, this option is not widely available. Far as I know, only Flipkart offers it in my city (Pune, India). Even in the case of Flipkart, the courier who came to deliver my two recent consignments didn't carry the POS 2X in a row and insisted on cash. I steadfastly refused and tweeted to the company to ensure that they honored their promise to accept Card on Delivery. Only then did the courier bring the POS and I could pay by card. Only Flipkart can answer why such a thing happens regularly. 

On another note, banking the unbanked is only one part of the whole picture: I know enough merchants who have bank accounts but are still not able to accept card paymentts. To quote a recent example, a store in my neighborhood used to accept cards until recently but is now unable to do so. Apparently, ever since his POS got upgraded, it no longer works on his old telephone. To make it work, he needs a new telephone, the cost of which he finds prohibitive. Hence, he has stopped accepting cards. Regulation (PIN), TELCO (infra) and other factors pose as severe a hurdle towards fostering a cashless economy as unbankedness or tax evasion motives of the merchant community.

Abhishek Chatterjee
Abhishek Chatterjee - Gartner Inc. - London 25 January, 2015, 16:54Be the first to give this comment the thumbs up 0 likes

Yes.. I think you are right in saying the entry barrier w.r.t. to infra, marchant, service providers and consumers is yet to reach a point where we can begin to move towards Cashless economy.. But if projects like (by facebook) or Digital India etc, which trying to reduce the entry barrier to digital adoption are successful.. I think it will happen.. by the reading your blogs and comments.. i know you are a fan of Cash. :)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 08 March, 2015, 13:04Be the first to give this comment the thumbs up 0 likes

@AbhishekC: TY for your comment. You couldn't be more wrong about my personal preference: Like I pointed out in another blog post, Cash in Hand Is Worth More Than Card In Bush, "Ever since I got my first credit card in the mid 1980s, I've preferred cards over cash for several reasons (think rewards for one!)." However, you could be very right about the overall market: According to this latest Celent article, "cash is by far the most dominant, as at 50% share, it’s obviously the same size as all the other payment types …combined. So cash isn’t dead, and not even mildly under the weather!"

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