Imagine your delivery executive arriving at a customer’s doorstep only to have the order returned immediately. This scenario is typical for eCommerce brands when customers opt for Cash On Delivery (COD) over prepaid orders.
While COD might seem necessary for customer trust, it directly correlates with significantly higher Return to Origin (RTO) rates. Beyond disrupting cash flow and increasing logistics costs, competitors often exploit COD by placing bulk orders they later return, creating artificial “out of stock” situations that damage your business. Alternatively, Pay on Delivery (POD) offers a middle ground, where customers scan QR codes to pay digitally upon receiving goods.
To overcome these challenges, eCommerce brands must encourage prepaid orders. Read on to discover how.
Content Index
- What are Prepaid Orders?
- Prepaid Orders vs. COD: What Are the Differences?
- Why Are Prepaid Orders Becoming More Popular?
- 5 Ways to Boost Prepaid Orders Effectively
- Conclusion
- FAQs
What are Prepaid Orders?
Prepaid orders are transactions where a customer pays for a product before it is delivered. For example, a customer orders stationery on Big Basket and pays the full amount of ₹1,500 upfront using their credit card. After the payment confirmation, Big Basket processes the order and delivers it to the customer’s doorstep.
Prepaid Orders vs. COD: What Are the Differences?
In prepaid orders, the payment is made upfront at the time of purchase instead of Cash On Delivery (COD), which is made in cash after the customer has received the product. Here are a few differences between the two:
Why Are Prepaid Orders Becoming More Popular?
According to a Shiprocket survey of 1000 buyers and 500 B2B sellers, 76% of the respondents favoured pre-paid orders over COD. Here’s why:
Better cash flow
Pre-paid orders offer immediate payments, ensuring consistent cash flow for eCommerce brands. Thus, they can better plan their finances and reinvest in business growth initiatives.
Reduced returns and cancellations
When customers pay upfront for orders, they show a higher level of commitment, resulting in fewer cancellations and returns. In 2024, the Indian eCommerce market saw an improvement in return rates. “Prepaid orders accounted for 62% of the total transactions and were associated with significantly lower return rates (10%) than COD orders.”
Efficient operations
Prepaid orders give sellers immediate access to funds. There’s no cash handling and they can streamline logistics, planning their resources based on the payments. Further, since the risk of returns is reduced in prepaid orders, there’s no increase in logistics or operational hurdles due to RTO (Return To Origin).
Lucrative payment offers
Another reason pre-paid orders are becoming popular is different bank offers and EMI options. Here’s an example of Firstcry highlighting different offers on online payments, such as 150% off on PNB Credit Cards, up to ₹250 cashback on CRED UPI transactions, and flat ₹80 cashback on SIMPL transactions.
5 Ways to Boost Prepaid Orders Effectively
Reducing COD and increasing pre-paid orders reduces RTO costs and improves profit margins. Here are a few ways to boost pre-paid orders:
Real-time payment routing
Real-time payment routing refers to directing a payment transaction through various available routes or networks to ensure the payment is immediately processed. Here’s how it can boost your prepaid orders:
- Immediate payment confirmation: Prepaid orders require immediate processing to confirm payment before fulfillment. Real-time routing ensures the payment is processed instantly, reducing delays.
- Enhanced customer experience: Customers expect instant gratification. Offering real-time payment confirmation improves their understanding and trust in the service.
- Reduced cart abandonment: With faster payments and confirmation, the chances of customers abandoning their purchases decrease.
- Efficiency in cross-border transactions: Real-time payment routing can make international prepaid transactions smoother and faster by optimizing the path across different networks.
Offering personalised discounts and offers on pre-paid orders
Offering personalised discounts and offers on pre-paid orders is a great way to encourage customers while increasing upfront sales. Personalised discounts make customers feel special and drive repeat purchases by aligning with their preferences or buying habits.
For example, Jewellery brand Tanishq uses occasion-based personalised discounts to boost prepaid orders. They offer special birthday discounts where customers receive exclusive pricing on diamond jewellery pieces when they make prepaid purchases during their birth month. Their “Birthday Collection” features items like the “Lumos Diamond Ring” and “Endearing Button Shaped Diamond Stud Earrings” and comes with additional benefits such as complimentary gift wrapping and priority delivery when paid for in advance.
Similarly, Tanishq offers anniversary specials where couples can receive up to 15% off on selected gold and platinum collections when paying online before delivery. By connecting these discounts to meaningful personal occasions, Tanishq creates emotional value while reducing COD-related logistics costs and improving cash flow predictability.
Other brands might offer 15% off on UPI transactions for prepaid orders. This approach makes the prepaid option financially attractive, convincing customers to choose prepaid over COD while promoting specific payment methods with lower transaction costs for the business.
Providing multiple payment options
Offering customers different payment options, such as UPI, digital wallets, and debit/ credit cards, can encourage them to choose prepaid orders over COD. However, you must ensure frictionless checkout to enable customers to complete their purchases.
Nimbbl’s secure payment gateway for Indian eCommerce brands enables you to provide customers with a seamless checkout experience. It’s fast checkout takes a maximum of 5 seconds, and there are no redirections, unnecessary clicks, or multiple OTPs.
Nimbbl offers payment links that let you receive payments via net banking, UPI, cards, wallets, etc. To receive your payment instantly, you need only generate a no-code payment link and share it with the customer via email, WhatsApp, Messenger, or SMS.
You can also use Nimbbl’s payment pages to offer your customers multiple payment options. Even if you don’t have a full-fledged website, you can use these custom pages to receive payments. Once received, you can track all your transactions on the Nimbbl dashboard.
Double down on payment security
Payment security is one of the most crucial requirements for winning customers’ trust. eCommerce brands should emphasise placing strict security measures for online transactions. Here are a few ways to do it:
- Enable two-factor authentication (2FA): This security method requires identification to verify the user. The user must then enter an OTP and a password to log in.
- Comply with PCI-DSS: PCI-DSS is a security standard that Indian eCommerce brands must follow to ensure the security of credit card information. Adherence to this standard secures customer data and reduces data breaches.
- Implement tokenisation: Tokenisation hides sensitive payment information, such as card numbers and CVV codes, and replaces the original card details with tokens (unique numbers) during payment processing.
In addition, it is crucial to select secure and PCI-DSS-compliant payment gateways like Nimbbl that follow all industry standards and security protocols and implement the best security practices.
Special loyalty programs for pre-paid customers
Implementing loyalty programs for customers who frequently choose prepaid orders over COD can help foster long-term relationships. To encourage customers to opt for prepaid orders in the future, you can offer free shipping, early access to sales, special discounts, vouchers, or redeemable points.
Flipkart Plus or SuperCoins is a loyalty program for prepaid customers. Customers earn ‘SuperCoins’ for every prepaid purchase. These coins can then be redeemed for benefits like early access to deals, faster delivery, priority customer support, and other exclusive rewards.
Conclusion
Though several Indian customers are choosing prepaid orders, many of the population still prefer COD.
For these customers to adopt prepayment, eCommerce brands must make online transactions easy, seamless, and secure. They also need to make prepaid orders more appealing to customers. In all your initiatives to boost prepaid orders, Nimbbl can be a great value addition.
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FAQs
What is a pre-paid order?
A transaction where customers pay for their purchase upfront before receiving the product, unlike Cash on Delivery (COD).
What is a purchase pre-paid order?
A buying transaction where the full payment is made at the time of ordering, before the seller processes and ships the product.
What does pre-paid delivery mean?
A delivery service where shipping and product costs are paid in advance using methods like credit cards, UPI, or digital wallets.
