The verdict in three sentences
Cash on delivery (COD) reassures the wary buyer but destroys the seller's margin with 15-30 % refusals and unrecoverable logistics costs. Mobile money prepayment cuts no-shows by 20 points and settles instantly, but can deter an unconvinced customer's first purchase. The winning 2026 strategy is neither all-COD nor all-prepaid, but a 30 % partial deposit that filters non-serious orders while keeping the customer's comfort.
COD vs mobile money: the real cost
COD looks free since there's no gateway fee. But each return costs round-trip logistics, ties up stock, and delays cash. Prepayment has a visible fee (1.5 %) but avoids most losses.
| Criterion | Cash on delivery | Mobile money prepayment |
|---|---|---|
| Direct fee | 0 % | ~1.5 % |
| Failure/return rate | 15-30 % | < 3 % |
| Return logistics cost | 1,500-4,000 FCFA | None |
| Cash flow | Delayed 3-7 d | Immediate |
| First-purchase trust | High | Medium |
| Margin eroded | 4-8 pts | ~1.5 pt |
The three models and when to use them
| Model | No-show | Best for | Limit |
|---|---|---|---|
| All COD | 15-30 % | New markets, wariness | Margin destroyed |
| 30 % deposit | ~10 % | Large baskets, furniture, tech | Slight friction |
| All prepaid | < 3 % | Loyal customers, small baskets | First-purchase friction |
In Nigeria, COD still represents about 40 % of orders in 2026: removing it overnight would crater sales. The transition runs through partial deposits, then full prepayment as trust builds.
The partial-deposit strategy
Requesting a 30 % mobile money deposit at order changes everything: the committed customer no longer backs out, and the seller at least covers logistics if the parcel is refused. This approach clearly lowers cancellations and no-shows while keeping COD for the balance to reassure.
Mini case study
Chidi sells flat-pack furniture in Lagos: 80 orders/month, average basket 60,000 FCFA equivalent, 25 % margin (15,000 FCFA). On full COD, 25 % refusals = 20 returned parcels — 20 × 3,500 FCFA logistics (70,000 FCFA) plus 20 lost sales (300,000 FCFA of margin). He switches to a mandatory 30 % deposit via Paystack/MoMo (1.5 % fee). Refusals drop to 8 %, recovering about 14 sales/month. Gain: +210,000 FCFA in monthly margin, minus ~27,000 FCFA of payment fees on deposits — a net gain of roughly 183,000 FCFA, plus cash collected immediately on 30 % of every order.
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FAQ
Should I remove cash on delivery entirely?
Not abruptly in a market like Nigeria where COD still carries ~40 % of orders. Better to introduce a partial deposit, then migrate gradually to prepayment.
How much does prepayment cut no-shows?
By about 20 points versus full COD. The failure rate typically drops from 15-30 % to under 3 % with mobile money prepayment.
What deposit amount should I ask for?
A 30 % deposit usually covers logistics on refusal and commits the customer enough to halve or third cancellations.
Does COD really cost more than mobile money?
Yes indirectly: between returns (1,500-4,000 FCFA/parcel) and lost sales, COD erodes 4-8 margin points versus ~1.5 point for mobile money.
Which provider for deposits in Nigeria?
Paystack and Flutterwave handle card and transfer prepayment well, with fees around 1.5 %. We combine them with deposit logic in the checkout.
Let's talk about your project. We set up the right COD, deposit or prepayment strategy for your market and margin. 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.
