Moving Customers From Cash on Delivery to Prepaid

Cash on delivery exists for good reasons. For a first-time buyer on an unfamiliar store, paying at the door removes the risk that the parcel never comes. Take it away abruptly and some of those customers simply don't order. So the goal isn't to abolish COD. It's to move the orders that are cheap to move, and to price the rest honestly.

The first step is knowing what a COD order really costs, because it's almost always more than the courier's COD fee.

Three costs hide behind cash on delivery. Returned orders (RTO) are shipped twice and earn nothing. Every COD delivery carries the courier's collection fee. And the cash reaches you later than a prepaid payment would, after the courier remits it. The return cost is the big one, and it's spread across the orders that do get delivered.

A simple way to see the true cost is to count it per delivered order. If r is the share of orders that come back, S is forward shipping, R is return shipping plus handling, and F is the COD fee on delivered orders:

Cost per delivered order = S ÷ (1 − r) + R × r ÷ (1 − r) + F

The same formula works for prepaid orders, with the prepaid return rate and the payment fee in place of the COD fee. The difference between the two results is what each converted order is worth to you.

Start at the top of this list. Each step down converts more orders but also risks losing a few customers who wanted COD.

Not every COD order is equally worth converting. Start where the gain is largest and the risk of losing the sale is smallest:

This is what "converting COD to prepaid" usually refers to. It adds nothing to checkout, because it happens after the customer has already decided to buy.

On store platforms, you can send the conversion message with the platform's own messaging tools or apps; the payment itself runs through your payment provider's plugin, for example on Shopify or WooCommerce.

The wording of the conversion message matters more than the tool that sends it. Keep it short, specific and honest. Three examples you can adapt:

Each one tells the customer what happens if they don't pay, which is what keeps the conversion honest and the order intact.

A few moves backfire:

Part of the case for prepaid has always been that UPI costs nothing to accept. That's changing for larger orders. NPCI's FAQ of 15 September 2026 says that from 15 October 2026, UPI merchant payments above ₹2,000 carry an MDR of 0.4%, capped at ₹300 per payment for amounts of ₹75,000 and above. Payments up to ₹2,000 stay at zero.

For many stores this changes the arithmetic only a little: 0.4% on a ₹3,000 order is ₹12, which you can set against what a returned COD order costs you. But put the real number in your worksheet, and remember that card payments carry their own MDR. Our explainer on MDR has the full table.

One quiet reason people choose COD is fear of waiting weeks for a refund if something goes wrong. If you move them to prepaid, keep that promise: issue refunds promptly, tell the customer when to expect the money, and make partial refunds easy for multi-item orders. A store with a reputation for quick refunds finds prepaid easier to sell. The Refund API handles full and partial refunds against the original payment, with status tracking.

Track these by week, split by payment mode:

You can get most of the benefit in a month without a big project:

Prepaid only wins if the payment works the first time. A customer whose payment fails at checkout may fall back to COD, or leave. Peneu routes each payment across more than one provider and moves traffic away from a provider that's failing, so a bad hour at one provider doesn't push your customers back to cash. Payment links and one-click checkout cover the two conversion points in this guide.