The verdict in three sentences
Cash on delivery (COD) converts better — roughly +12 points — but it destroys margin: -6 points once returns, trapped cash and cash-handling are counted. Prepaid mobile money settles on day zero with a refusal rate below 3 %, versus 20 to 30 % for COD at the door. In 2026 in Lagos, the right answer is almost always hybrid: COD for first-time buyers, incentivised prepaid for everyone else.
COD, prepaid or hybrid: what each model really costs
COD is not "free" just because the customer pays at the end. Every parcel refused at the door means a transporter round-trip, an immobilised product and sometimes a damaged one. Prepaid mobile money locks the sale before shipping, but it scares off a share of suspicious buyers.
| Metric (2026 ballpark) | COD at the door | Prepaid mobile money |
|---|---|---|
| Refusal / cancellation rate | 20-30 % | < 3 % |
| Time to get paid | 5-9 days | Day 0 |
| Cash-handling cost | 3-5 % of revenue | ~1 % (MoMo fees) |
| Checkout conversion | baseline +12 pts | baseline |
| Real net margin | baseline -6 pts | baseline |
| Cost of one return | NGN equiv. of 3,000-5,000 FCFA | near zero |
| Trapped cash | high | none |
The COD share is falling sharply: from 52 % of online orders two years ago to roughly 41 % in 2026 across the region, driven by mobile money adoption.
The hidden cash-flow impact
With COD, your money sleeps at the transporter. If you make 3,000,000 FCFA in monthly COD sales with a 7-day remittance delay, about 700,000 FCFA is permanently locked outside your account. That trapped working capital cannot be reinvested in stock or used for purchases.
| Item | COD (3M FCFA/month) | Prepaid (3M FCFA/month) |
|---|---|---|
| Trapped cash | ~700,000 FCFA | 0 FCFA |
| Monthly collection fees | 90,000-150,000 FCFA | ~30,000 FCFA |
| Return costs (25 % refusal) | ~187,500 FCFA | ~0 FCFA |
| Average settlement delay | 7 days | 0 days |
Mini case study
Emeka runs a sneaker store in Lagos, average basket equivalent to 25,000 FCFA, 120 monthly COD orders. He faces 28 % doorstep refusals, i.e. 34 returned parcels at 4,000 FCFA logistics cost: 136,000 FCFA lost every month, plus 5 to 9 days waiting for his money. By moving loyal customers to prepaid mobile money with a 5 % discount, he shifts 40 % of orders to prepaid: overall refusals drop to 17 %, he recovers around 55,000 FCFA/month and collects half his revenue instantly. The hybrid model returns margin without breaking conversion.
FAQ
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Should I remove cash on delivery entirely?
No. COD remains a powerful friction-reducer for first-time buyers who do not know you. Keep it, but reserve pricing incentives for prepayment to gradually shift 30 to 40 % of volume.
Is mobile money expensive for the merchant?
Fees hover around 1 % of the amount depending on operator and channel, far below the 3 to 5 % cash-handling cost of COD. On a 25,000 FCFA basket that is about 250 FCFA, easily offset by the absence of returns.
How do I cut COD refusals without going prepaid?
WhatsApp or call confirmation before shipping cuts refusals by up to 35 %, and a small deposit halves the rate. That is the first lever to pull before any model change.
Which model should I pick as a beginner?
Start hybrid: COD offered everywhere, but a slightly cheaper "prepaid" price and systematic confirmation. Measure over 60 days and adjust to your real refusal rate.
How long to integrate mobile money and card checkout?
On a well-built store, integrating payments and confirmation webhooks takes a few days to two weeks depending on complexity. We deliver tested checkouts with same-day settlement.
Let's talk about your project. We build hybrid stores that keep COD while pushing profitable prepaid mobile money. WhatsApp +221 77 596 93 33.
Mohamed Bah
Fondateur, Kolonell
Passionate about digital and entrepreneurship in Africa, Mohamed has been helping Sénégalese businesses with their digital transformation since 2020. Founder of Kolonell, he believes every SME deserves a professional and accessible online présence.
