PayUPaisa has launched a new payment option called ‘Release on Delivery,’ with which users have the power to release payment to a seller only after an order is satisfactorily delivered. It is like an escrow account which will hold your money temporarily, until you decide to complete the transaction.
The service is expected to increase the trust of a buyer on one hand and bring down costs for the retailer on the other.
The Cash on Delivery mechanism, under which the retailer gets paid in cash at the time of delivery, has become a bit of a pain for the e-commerce websites. While the CoD method has its advantages, high transaction cost often makes it a lousy proposition for e-commerce companies.
Third party courier companies also charge cash handling fees from the retailers, thus eating further into their margins.
An internal survey done by PayUPaisa revealed that more than 35% of users who do Cash on delivery, can actually pay online. Nearly three fourth of these users chose CoD because of trust factor.
“Around 20% of CoD orders are not honored by the buyer (or returned) and considering such high rates on returns, CoD becomes unbearable for merchants,” the company said. Roughly 10% of items ordered through CoD are found to be damaged which incurs additional 1.5% to 2% on overall CoD cost, it added.
How does Release on Delivery Payment model work?
When you buy a product on a website, you are shown multiple payment options including CoD. On selecting CoD, the RoD payment option is also shown. A buyer’s money is kept with PayUPaisa and is not released to the merchant until the buyer explicitly informs PayUPaisa to release the payments.
If PayUPaisa doesn’t receive any confirmation from the buyer in 3 days after the product delivery, the payments are released to the merchant by default. The company has also setup a dispute resolution mechanism to resolve differences between a buyer and a seller.