The true cost of cash on delivery

In this much awaited delightful guide, discover how cash on delivery impacts your revenue and profitability, specifically across the Middle East and North Africa, and while cash may not be going anywhere anytime soon, the transition to more efficient digital payments is a global phenomenon that has only just started.

Digital payment methods have been on the rise even before the COVID-19 pandemic, and this trend is expected to continue. According to research by PwC and Strategy&, global cashless payment volumes are predicted to increase by more than 80% from 2020 to 2025, reaching almost $1.9tn transactions. 

This trend is expected to continue, with cashless payment volumes almost tripling by 2030. The Asia-Pacific (including Middle East) region is expected to see the fastest growth, with a 109% increase in cashless transaction volume until 2025 and a 76% increase from 2025 to 2030.

Africa is expected to see the second highest growth (78% and 64%), followed by Europe (64% and 39%). Latin America is also expected to see significant growth (52% and 48%), while the US and Canada are expected to see the slowest growth (43% and 35%).

Cash on delivery is a payment method in which customers pay for goods at the time of delivery rather than upfront at the time of purchase. While cash on delivery may be convenient for customers, it can be costly for businesses.

One major cost of cash on delivery is the risk of non-payment. When customers pay in cash at the time of delivery, there is a risk that they may not have the full amount or may refuse to pay altogether. This can result in lost sales for the business.

Another cost of cash on delivery is the handling of cash. Businesses must ensure that the cash is safely transported and stored, which can be a security risk and require additional resources such as armored cars and secure storage facilities. Handling cash also adds administrative costs as the business must count and reconcile the cash received.

Cash on delivery can also be slower and less efficient than other payment methods. The process of delivering the goods and collecting payment can take longer than simply processing an electronic payment at the time of purchase. This can lead to slower turnaround times and reduced customer satisfaction.

Overall, while cash on delivery may be a convenient option for customers, it can be costly for businesses due to the risks and inefficiencies involved. Businesses may be better off offering a range of payment options including electronic payments, which can be faster, more secure, and more cost-effective.

Here is an example of the true cost of cash on delivery assuming a transaction amount of AED 360, where you could end up paying a whopping 11.19% in additional costs.

With Mamo Business you can digitize your payment process regardless of where and how you sell. Contact us to learn how we can help.