The verdict in three sentences
Cash on delivery (COD) builds trust but destroys margin: heavy returns, cash to handle, tied-up working capital. Prepaid mobile money flips the problem: margin protected, but 55% of shoppers still hesitate to pay upfront. The middle path is the deposit: a small prepayment commits the customer without scaring them off.
Why does 100% COD cost so much?
With full COD, nothing commits the buyer. They order on impulse, change their mind, are not home at delivery. Every return is a paid rider round-trip for zero sale. Add cash reconciliation (lost notes, errors, rider float) and margin melts away.
Prepaid mobile money removes nearly all of it: a customer who has paid comes to collect. But demanding 100% upfront on a first purchase drives away customers who do not know you yet.
| Criterion | 100% COD | 20% deposit + COD | 100% MoMo prepay |
|---|---|---|---|
| Return rate | 25-35% | 12% | 6% |
| Cash reconciliation loss | ~2% | ~1% | 0% |
| Fee per transaction | NGN 300 COD | MoMo fee on 20% | MoMo fee on 100% |
| Rider float risk | High | Medium | None |
| Customer acceptance | 55% prefer | Good | 45% comfortable |
| Cash flow | Tied up | Partly freed | Freed |
| Margin protected | Low | Good | Excellent |
How do you build trust in 3 orders?
The trick is not to pick a side but to ramp trust. First order from a new customer: 20% deposit via mobile money, balance on delivery. This filters out fantasy orders while keeping COD comfort. After 2 or 3 clean deliveries, offer full prepay with a small perk (free shipping, promo code).
| Trust tier | Payment rule | Effect |
|---|---|---|
| Order 1 (new) | 20% deposit + COD balance | Returns from 30% to 12% |
| Order 2 | 20% deposit or prepay, buyer's choice | Habit forming |
| Order 3+ (loyal) | MoMo prepay, loyalty bonus | Returns ~6%, max margin |
This trust ramp turns a wary buyer into a prepaying customer in three purchases, without ever pushing them.
Mini case study
Fatou sells clothing online in Lagos, average basket NGN 20,000, gross margin 40% (NGN 8,000). On 100% COD, out of 100 orders she gets 30 returns: 70 sales x 8,000 = NGN 560,000 margin, minus 30 rider round-trips at NGN 900 (27,000) and 2% cash loss (~28,000), so ~NGN 505,000. On 20% deposit + COD she drops to 12 returns: 88 sales x 8,000 = 704,000, minus 12 x 900 (10,800) and negligible MoMo fees, so ~NGN 693,000. Estimated gain: over NGN 185,000 in margin on 100 orders, purely by changing the payment rule (2026 order of magnitude).
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FAQ
Is COD doomed in West and East Africa?
No, 55% of shoppers still prefer it out of caution. But pure 100% COD costs too much: a partial deposit keeps COD trust without the heavy returns.
How much deposit should you ask for?
20% of the basket is the sweet spot: enough to commit the customer (returns from 30% to 12%), low enough not to scare them. Below 10%, the deterrent effect disappears.
Which wallet for the deposit?
All of them, buyer's choice. Offering the main mobile-money wallets side by side maximizes conversion: each pays with the wallet they already hold. Kolonell integrates them natively at checkout.
How do you handle the remaining cash on partial COD?
The rider only collects 80% in cash, which reduces float risk and reconciliation errors. A mobile-money receipt for the deposit already secures part of the sale before the run even starts.
Become a Kolonell referral partner. Do you know merchants bleeding money on COD returns? Refer them: 12% commission on e-commerce projects, 15% + 5% recurring on showcase sites, 10% on marketplaces, 8% on institutional.
Let's talk about your project. We set up mobile-money deposits and the trust ramp on your store. 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.
