• 60 to 65% of Indian e-commerce orders are COD (ET Prime Research, 2024)
• COD adoption is highest in Tier 2 and Tier 3 cities where digital payment trust is still growing
• 25 to 30% of COD orders result in RTO compared to just 2 to 3% for prepaid orders
• Indian e-commerce businesses lose over Rs. 20,000 crore annually due to RTO and failed deliveries
• COD Intelligence, order verification, and prepaid incentives are the most effective ways to reduce RTO

Why Do Indian Shoppers Still Prefer Cash on Delivery in 2025?

Cash on delivery became the default payment method in India for reasons rooted in trust, infrastructure, and shopping behaviour, and those reasons haven’t fully disappeared even in 2025.

1. Trust in online payments is still evolving: Despite the UPI revolution, a large section of Indian shoppers, particularly first-time online buyers and shoppers in smaller cities, remain cautious about sharing card details or making prepaid payments with unfamiliar brands. COD removes that barrier entirely. The shopper pays only after seeing the product, which feels inherently safer.

2. COD opened up Indian e-commerce to the masses: When Flipkart introduced COD in 2010, it was a turning point for Indian e-commerce. Millions of shoppers without credit cards or reliable internet banking suddenly had access to online shopping. That behavioural pattern has carried forward. Today even UPI-savvy shoppers in Tier 2 and Tier 3 cities often default to COD out of habit.

3. Product inspection before payment: Indian shoppers, especially for categories like fashion, footwear, and electronics, want to see the product before committing money. COD gives them that option. This is particularly important in a market where product images and descriptions don’t always match what arrives.

4. Digital payment adoption is uneven across India: While metros have high UPI and card penetration, rural India tells a different story. According to available data, digital payment adoption in rural India sits at around 16% despite 41% internet penetration. For these shoppers, COD is not a preference, it is the only practical option.

5. The impulse purchase factor COD lowers the psychological barrier to placing an order. Shoppers can add to cart and complete checkout without the friction of entering payment details. This drives impulse purchases, which is good for conversion rates but contributes to higher RTO when buyers change their minds before delivery.

How the Cash on Delivery Process Works in Indian E-commerce?

1. Customer Places Order: The customer selects products and adds them to their cart.
2. Customer Chooses COD: At checkout, the customer selects the “Cash on Delivery” option.
3. Order Processing and Shipping: The business processes and ships the order.
4. Delivery and Payment: The delivery agent collects payment in cash or via digital means, such as UPI.
5. Order Completion: Once payment is received, the order is considered complete.

Cash on Delivery Pros and Cons for Indian E-commerce Businesses

Cash on Delivery Pros and Cons for Indian E-commerce Businesses

• Cash on Delivery (COD) allows customers to pay at the time of delivery, reducing the perceived risk of online fraud but increasing business costs.
• Cash in Advance requires customers to pay upfront, ensuring immediate payment but potentially deterring hesitant customers.

Cash on Delivery vs Prepaid Orders: What Indian Businesses Should Know

The more relevant comparison for Indian e-commerce businesses in 2025 is COD vs prepaid orders. Here is how they compare across the metrics that matter most:

Order commitment — Prepaid orders represent a firm buying decision. COD orders are softer commitments. The customer can refuse delivery or simply not be home. This is why RTO rates differ so dramatically between the two.

RTO rate — COD orders see a 25 to 30% RTO rate in India. Prepaid orders see just 2 to 3%. That gap directly impacts shipping costs, inventory management, and working capital.

Conversion rate — COD consistently drives higher conversion rates especially among new customers and in Tier 2 and Tier 3 cities. Some businesses report 20 to 30% higher conversions when COD is available.

Cash flow — With prepaid orders, money hits your account before the product ships. With COD, you wait until after delivery and settlement by the logistics partner, which can take 7 to 14 days depending on the courier.

Fraud risk — Fake orders, wrong addresses, and deliberate refusals are almost exclusively a COD problem. Prepaid orders have near-zero fraud risk at the order placement stage.

The ideal strategy for most Indian D2C businesses is not to eliminate COD but to convert as many COD orders to prepaid as possible through incentives, while using smart COD controls to block genuinely high-risk orders.

Real Examples of Cash on Delivery in India  

COD is used across almost every e-commerce category in India, but its impact and challenges vary significantly by sector.

Fashion and apparel — the highest COD category in India. Shoppers frequently order multiple sizes or styles intending to keep one and return the rest. RTO rates in fashion can exceed 35 to 40% for COD orders. Brands like Myntra and Ajio have experimented with COD restrictions for repeat returners.

Electronics and mobiles — COD adoption is high but businesses are more cautious. Many platforms cap COD availability for high-value electronics orders above a certain cart value to limit fraud and theft risk during delivery.

Grocery and daily essentials — COD adoption is declining here as quick commerce apps like Blinkit and Zepto have trained urban shoppers to pay digitally upfront. However, COD remains common in hyperlocal grocery delivery outside metros.

D2C brands — for newer D2C brands without established trust, COD is often the only way to convert a first-time buyer. Many D2C brands report that their first purchase from a new customer is almost always COD, with subsequent purchases switching to prepaid as trust builds.

How to Offer Cash on Delivery in India Without Losing Money on RTO  

While cash on delivery offers significant benefits, it also presents challenges like fraudulent orders, incorrect addresses, and high return rates. Razorpay’s Magic Checkout helps businesses combat these issues with advanced COD features and analytics.

Additionally, if you have a store on Shopify, you can now configure COD settings directly from the Razorpay dashboard. This upgrade eliminates the need for Shopify’s ACOD app and other cash on delivery plugins, allowing for a seamless and efficient setup directly through Razorpay. Save time and streamline your operations with our integrated solution.

Get Started With Magic!

COD Intelligence (Smart COD)

COD Intelligence is powered by billions of data points and trained on extensive shopping patterns. Its sole mission is to protect businesses from high-risk COD orders. Here’s how it works:

At checkout, COD Intelligence analyzes the risk level of each shopper in real-time.

Based on this analysis, it can dynamically decide to:

• Enable cash on delivery for low-risk shoppers.
• Disable cash on delivery for high-risk shoppers.
• Offer partial cash on delivery as a middle ground for medium-risk shoppers.

This advanced decision-making capability ensures businesses can minimize RTO costs while maintaining a seamless shopping experience for customers.

RTO Analytics Dashboard

The RTO Analytics Dashboard transforms raw RTO data into actionable insights, empowering businesses to optimize their operations.

The dashboard provides a clear overview of RTO performance over the past 90 days, highlighting:

Total Orders: The overall number of orders processed.

High-Risk Orders: Orders identified as having a high probability of being returned.

Low-Risk Orders: Orders deemed unlikely to be returned.

Gain valuable insights into the factors contributing to high-risk order designations:

Address Validation: Identify patterns in incorrect or incomplete addresses.

Order Behavior Analysis: Detect unusual purchasing patterns indicative of potential RTOs.

Use data-driven recommendations to minimize RTOs:

Identify Problem Areas: Pinpoint specific regions or customer segments with higher RTO rates.

Analyze Customer Behavior: Uncover trends in customer actions that lead to returns.

Implement Targeted Strategies: Develop and execute plans to address identified issues.

By combining sophisticated analytics with proactive RTO prevention, Magic Checkout helps businesses increase revenue, improve efficiency, and enhance the customer experience.

RTO Protection

Razorpay provides e-commerce stores with RTO protection on all Magic Checkout fulfilled orders. Razorpay wants E-commerce businesses to incur less loss, and that’s why Magic Checkout is here to absorb the RTO costs. It can help E-commerce businesses overcome RTO losses and boost growth.

Advanced COD Controls 

• Flexible Slab Configurations: Businesses can create multiple COD eligibility slabs based on cart value, enabling tailored COD options for different customer segments.
• Geographic & Product-Level Controls: Easily sync your shipping profiles, zones, and methods from Shopify to configure COD accordingly. This feature allows you to set COD preferences at the product, geographic, and shipping method levels, offering greater flexibility and precision.
• Advanced Blocking Options: For enhanced security and control, block COD for specific pin codes, customer phone numbers, email addresses, and IP addresses directly from the Razorpay dashboard.
• Enhanced Product Category Management: The Advanced COD version introduces product categories, enabling businesses to set unique COD rules and rates for each category. This allows for granular control over the shopping experience, ensuring customized configurations for diverse product offerings.

All these advanced COD settings are seamlessly integrated into the “COD Settings” tab on the Razorpay dashboard. Enabling the COD feature is as simple as toggling a switch, allowing you to configure the settings as per your business requirements.

COD to Prepaid Conversion 

One effective strategy involves targeted outreach to customers who opt for cash on delivery orders. Through personalized WhatsApp messages, businesses can incentivize customers to convert their COD orders to prepaid by offering discounts or incentives. These messages include a Razorpay payment link, enabling customers to make prepayments and streamline the transaction process conveniently. Additionally, merchants can consider implementing an extra COD fee as a deterrent for COD orders, encouraging customers to choose prepaid options and further optimizing their payment processes.

By prioritizing prepaid orders and leveraging the capabilities of Magic Checkout, businesses can enhance their cash flow, reduce return rates, and simplify operational processes.

Multiple Payment Options

In the past, customers had to choose between cash on delivery and online payments, each in its own category. Online payment methods like cards and UPI were listed separately. Now, with Magic Checkout, all payment options, including COD, appear together in one view. This simplifies the process for customers, allowing them to easily select their preferred payment method and place an order without any confusion.

Wrapping Up

Cash on delivery in India is not going away. As long as digital payment trust gaps exist across geographies and customer segments, COD will remain a non-negotiable part of the Indian e-commerce stack. The businesses that win are not the ones that try to eliminate COD, they are the ones that manage it intelligently, convert where possible, and protect margins through smarter logistics and fraud controls.

While cash on delivery is popular in India, it doesn’t have to be a business risk. Magic Checkout empowers businesses to leverage COD while minimizing costs and operational challenges. By optimizing RTO management and offering advanced COD controls, businesses can enhance their customer experience and drive profitability.

Get Started with Magic Checkout today to reduce RTO losses and streamline your COD payment processes.