The verdict in three sentences
Cash on delivery (COD) maximises first-order conversion (+8 points on average) but triggers 15 to 25% returns that eat the margin. Prepaid mobile money cuts returns to 3-5% for just 1 to 1.5% in fees, at the cost of lower conversion among customers who don't know you yet. The winning 2026 strategy is hybrid: a 30% MoMo deposit at checkout, balance on delivery.
COD vs prepaid: the real impact on your numbers
The choice isn't ideological, it's accounting. Here is each mode's effect on 100 orders, average basket 2,000 KES (2026 order of magnitude).
| Metric | COD | Prepaid MoMo | Hybrid (30% deposit) |
|---|---|---|---|
| Conversion rate | Baseline +8% | Baseline | Baseline +5% |
| Return rate | 20% | 4% | 7% |
| Payment fees | 0% | 1.3% | 1.3% on deposit |
| Cash collected | On delivery | Immediate | 30% immediate |
| Parcels lost / month | 20 | 4 | 7 |
COD wins orders but loses 1 in 5 en route; prepaid secures cash but filters out the undecided; hybrid captures the best of both.
Turning rates into real margin
A return is never neutral: it consumes the outbound trip, sometimes the return trip, and ties up stock. The table below converts rates into net margin for 100 orders.
| Mode | Revenue collected | Estimated return cost | Relative net margin |
|---|---|---|---|
| COD (high conversion) | 216,000 KES | 14,600 KES | Medium |
| Prepaid MoMo | 200,000 KES | 2,500 KES | High |
| Hybrid 30% deposit | 210,000 KES | 5,000 KES | Highest |
Hybrid collects almost as much as COD while cutting return costs by nearly two thirds.
Mini case study
Brian sells shoes online from Nairobi, 200 orders per month, basket 2,000 KES. On pure COD he converts well but suffers 20% returns: 40 parcels come back, roughly 15,000 KES of logistics costs lost each month.
He switches to a 30% M-Pesa deposit (600 KES at checkout). His conversion barely dips, returns fall to 7% (14 parcels), and he secures 120,000 KES of cash at order time. Estimated saving on returns: about 10,000 KES per month, or 120,000 KES a year.
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FAQ
Does prepayment really scare customers off?
On a first order from an unknown seller, yes: conversion can drop 6 to 8 points. But a partial 30% deposit limits that friction while committing the buyer.
How much are mobile money fees in 2026?
Expect an order of magnitude of 1 to 1.5% per M-Pesa or mobile money transaction, easily offset by cutting returns from 20% to 5%.
When should I require 100% prepayment?
For loyal customers, custom products, high-failure zones, or high baskets above 7,000 KES where a return is expensive.
How do I handle the deposit technically?
A checkout that triggers a 30% mobile money payment and records the balance as due on delivery is enough; the order status flips automatically once the deposit lands.
Does hybrid complicate accounting?
A little, but a dashboard separating collected deposits from balances due clears it up; the gain on returns far outweighs the effort.
Let's talk about your project. We set up your COD, prepaid or hybrid checkout with mobile money based on your real 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.
