The verdict in three sentences
Cash on delivery (COD) remains Kenyan buyers' favourite mode because it inspires trust, but it costs you dearly: 15 to 30 % of orders rejected and cash frozen until collection. Prepaid mobile money (M-Pesa, Airtel Money) secures collection and drops failures below 5 %, but deters some buyers. In 2026 the right trade-off in Kenya is the hybrid: a mobile-money deposit at order time, the balance on delivery.
COD, prepaid, hybrid: the three models
Pure COD maximises top-of-funnel conversion (the customer orders with no perceived risk) but concentrates all the risk on you: product prepared, courier paid, and at the end, a rejection. Prepaid flips the logic: the customer commits financially, so they open the door, but some abandon at the moment of payment.
The hybrid settles it: a 20 to 30 % deposit paid via mobile money locks in commitment (nobody loses a KSh 300 deposit for nothing), and the cash balance on delivery preserves the reassuring COD reflex. It is now the standard for stores that want to grow in Nairobi without bleeding cash on failed runs.
| Payment mode | Rejection/failure rate 2026 | Cash flow | Buyer friction |
|---|---|---|---|
| Pure COD | 15 - 30 % | Frozen 3-7 days | Very low |
| Prepaid mobile money | 3 - 6 % | Immediate | Medium to high |
| Hybrid (deposit + balance) | 8 - 12 % | Partial immediate | Low |
| Prepaid + discount | 3 - 5 % | Immediate | Low (incentivised) |
Benefits, risks and hidden costs
The true cost of COD is not visible in the price: it is the parcel prepared for nothing, the courier paid anyway, the product that sometimes returns damaged, and the cash handled by the courier (loss risk). Conversely, mobile money carries a commission cost (often 1 to 1.5 % merchant-side) but removes all these hidden fees.
Kenya, a more mature market on prepaid, saw the mass shift to M-Pesa bring rejection rates into single digits. That trajectory foreshadows what is gradually happening across the region: the more buyers get used to mobile money, the more the hybrid becomes the norm.
| Criterion | COD | Prepaid mobile money |
|---|---|---|
| Collection commission | 0 % direct (hidden costs) | 1 - 1.5 % |
| Cash handled by courier | Yes (risk) | No |
| Parcels prepared for nothing | 15-30 % | 3-6 % |
| Accounting reconciliation | Manual, slow | Automatic |
| Collection delay | 3-7 days | Instant |
Mini case study
Kossi runs a fashion store in Nairobi: 200 orders/month, average basket KSh 2,000. On pure COD, 25 % rejection = 50 lost parcels/month. Average courier cost KSh 250/run: KSh 12,500 in lost runs, plus the margin never made on 50 sales.
He switches to the hybrid with a KSh 400 mobile-money deposit. The rejection rate falls to 10 % (20 parcels). Lost runs: KSh 5,000. Direct saving: KSh 7,500/month on runs, plus 30 extra sales collected (KSh 60,000 of revenue recovered). The mobile-money commission on deposits costs barely KSh 1,200/month.
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FAQ
Is COD really free?
No. It looks free but hides the cost of parcels prepared for nothing (15-30 % of orders), lost runs and handled cash. Across 200 orders/month these hidden costs often exceed KSh 12,000.
Does a deposit scare customers off?
Less than you'd think. A 20-30 % mobile-money deposit is accepted by most serious buyers and mainly filters out unreliable orders. The rejection rate drops from 25 % to about 10 %.
What commission on M-Pesa and Airtel Money merchant-side?
In 2026, expect an order of magnitude of 1 to 1.5 % merchant-side depending on operator and volume. That is far below the real cost of failures on pure COD.
How do I push full prepayment?
A small discount (2-5 %) or free shipping for advance payment shifts a good share of buyers to prepaid, dropping failures below 5 %.
Can I offer all three modes on my store?
Yes, a well-built store lets the customer choose COD, hybrid or prepaid, with automatic rules (mandatory deposit above a certain amount, for example).
Let's talk about your project. We integrate COD, mobile-money deposits and prepayment into a store built for your market. 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.
