Full Form of COD

Full-Form of COD (Cash on Delivery)

The full form of COD stands for Cash on Delivery. It can be defined as a modern mode of payment system made for online purchases under which the buyer buys goods from online platforms, websites, etc. and processes its payment at a later date, i.e., at the time of receipt of the goods either in cash or by debit/credit card via the delivery agent

• COD stands for Cash on Delivery, a payment method for online purchases. With COD, buyers can purchase goods from online platforms and websites and pay for them later when they receive the goods. Payment can be made in cash or by debit/credit card through the delivery agent.
• Cash on delivery builds trust between customers and sellers. Amazon offers this service.
• In this procedure, sellers deliver goods or partner with a courier agency. They receive payment after charges are deducted, but this increases costs and reduces profit.

How does COD Work?

• This is an easy mode of payment. Under this payment system, the delivery agent collects the bill amount against an order from its consignee in cash once the consignment is delivered. The cash collected is then deposited at the nearby office of the e-commerce company which sold the goods. This is one of the easiest, most convenient, and most satisfactory payment modes for both buyer and seller.
• Also, money handling becomes easy and evacuates complex processes making it further convenient for the seller. Sales proceeds are instantly realized, ruling out the possibility of payment failure.
• For the buyer, cash on delivery mode is a safer payment option as it is processed only after the consignment is delivered and the buyer is satisfied with the goods delivered. The buyer may reject the package if the product is damaged or has been wrongly delivered.
• This process involves the placement and execution of the order. The buyer's payment is processed to the supplier once the product is delivered. This process starts from the moment the order is placed.
• Generally, e-commerce companies ship sold products/consignments through their internal logistics or hire a separate logistic partner to deliver consignment and collection of payments.
• Once the order is placed with the e-commerce company, the consignment is sourced from a supplier. An invoice cum delivery challan is prepared, which is attached with the consignment for easy delivery.
• After which, the consignment with the attached invoice is handed over to the logistics company to deliver the order to its destination and collect the payment. Moving further, the delivery man takes the consignment to the buyer and collects the payment in cash or card payment at his doorstep.
• For card payment, the delivery executive carries a card swiping machine. After collecting the billed amount, the agent deposits the collected amount in his office, which the logistics company, in turn, hands over to the supplier after deducting the handling charges.

Factors

1. Convenience - Cash payment has always been a convenient method of trading. Cash payment involves hassle-free transactions.
2. Lack of Secure Payment Gateways - Online threats such as hacking involve money risk. When secure payment gateways are unavailable, it leads to the loss of customer money.
3. Familiarity with Cash Payments - Since time, many people have only dealt in cash. Therefore, the mode of cash payment is the easiest option for any individual as people are always reluctant to adopt changes in the business environment.
4. Less Credit/Debit Card Users - Penetration of credit and debit cards is still not too much among the citizens. Banks charge a certain amount of money on credit and debit cards, which leads to less usage of these cards.

Cash on Delivery vs Online Payment

• Cash on delivery is simple, easy, and convenient as it does not require any information technology knowledge. It is more acceptable, reliable, and satisfactory since the payment is made only after the product is delivered. Also, no banking medium is involved in cash on delivery mode of payment.
• While online payment is much faster, it involves third-party intervention and the risk of interruption in payment if the payment gateway halts or gets stuck at any point. This is suitable only for those customers who are well versed in technology. It is cheaper for both sellers and buyers as it saves the cost of a collection agent who delivers the product from the seller's point of view, while for a buyer, it provides many discounts and offers in online payments. Also, today’s money is always more valuable than money acquired after some time (considering the time value of money).

Importance

The greatest importance of cash on delivery is trust. Once received at the customer's doorstep, the product is reviewed, checked, and only the payment is processed. All the major e-commerce companies like amazon offer the service of cash-on-delivery.

• These transactions are hassle-free as this involves just handing over cash and taking the product. No involvement of third parties between buyer and seller.
• The product can be returned easily if the customer is unsatisfied with the product, and the money is deposited in the bank.
• There is risk in online payment methods such as net banking, credit card, and debit card as these are more susceptible to fraud, so it is a more secure payment option.

Advantages

• No Frauds of Online Payment - This is the most secure mode of payment. One does not require to use his sensitive financial information on public domains like bank a/c, credit, and debit card details.
• Ease to Payment - Payment is made only once the product is delivered. The money does not get stuck with the seller. The customer can return the product without paying the extra money if the product is defective or damaged.
• No Financial Third-Party Intervention- The customer need not have a credit or debit card to purchase or even a bank account.

Disadvantages

• Prone to Losses - Under this payment method, the seller is more vulnerable to losses when the customer returns the product without paying for it; the seller incurs the cost of delivering the product.
• More Expensive - Courier companies charge an extra amount when opting for cod. The seller feels it difficult to bear the burden of this cost.
• Suspicious Orders - Sometimes, as a part of mischief, someone may post fake orders on cash on delivery with the wrong address. Processing delivery of such orders will lead to losses.

Conclusion

• It can be defined as a mode of payment under which the buyer processes payment for goods only after receiving goods/consignment at their doorstep.
• Usually, the seller has in-the-house or a tie-up with a courier agency that delivers goods to the buyer and collects the sale process. After deducting its charges, it deposits the same to the seller's bank a/c. This is a more convenient, easy, secure mode of processing payment, but at the same time, it adds to the seller's cost and thus reduces profits.

Frequently Asked Questions (FAQs)

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