The verdict in three sentences
Cash on delivery (COD) stays essential to convert wary new buyers, but it is expensive: 15-30% failed deliveries, fraud, and 3-6% cash-handling cost. Prepaid mobile money (Wave, MoMo, bank transfer) drops to 3-7% failures and protects your cash flow. The 2026 strategy is not to choose but to nudge: COD for the first purchase, incentivized prepay for the rest.
COD vs prepaid: the true cost
COD is never "free". Every refused parcel is a paid round trip, a tied-up product and sometimes damage. Reconciling cash collected by riders adds further cost and risk.
| Criterion | COD (cash on delivery) | Prepaid mobile money |
|---|---|---|
| Failed-delivery rate | 15 - 30% | 3 - 7% |
| Handling + reconciliation | 3 - 6% of order | ~1 - 2% (MoMo fees) |
| Fraud / fake buyers | High | Low |
| Cash flow | Collected after delivery | Collected immediately |
| Frivolous returns | Frequent | Rare |
| New-buyer trust | Very strong | Medium |
COD wins trust, prepay wins margin. The classic mistake is staying 100% COD out of fear of losing sales, when a simple incentive rebalances everything.
The mix that protects margin
A targeted discount and partial prepay change the equation without breaking conversion.
| Lever | Measured effect | Recommendation |
|---|---|---|
| 2-5% discount if prepaid | Shifts 20-40% of buyers | Show at checkout |
| Partial prepay (delivery fee upfront) | Cuts no-shows 40-60% | Standard from 2nd order |
| COD limited to 1st purchase | Converts skeptics | Default policy |
| Mandatory prepay above a threshold | Protects big orders | Threshold ~50,000 FCFA |
| Loyal customer = prepay | Lowers overall cost | Loyalty program |
The golden rule: new customer on COD, repeat customer on prepay. You reassure at entry, then progressively migrate to a payment that costs you less and pays you faster.
Mini case study
Chidi sells electronics in Lagos, 200 orders/month at an average of 45,000 FCFA. On 100% COD he suffers 25% failures (50 parcels) costing 2,500 FCFA round-trip each, i.e. 125,000 FCFA/month, plus 4% cash handling on 150 successful deliveries (270,000 FCFA). By introducing a 3% prepay discount and an upfront delivery deposit, he shifts 35% of buyers to prepay and cuts failures to 12%. Result: failures drop to 24 parcels (60,000 FCFA) and cash cost halves. Estimated net saving: over 180,000 FCFA per month, despite the discount granted.
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FAQ
Does COD really lose money?
Yes, indirectly. Between 15 and 30% of COD deliveries fail, each costing 1,500-4,000 FCFA round-trip, on top of 3-6% cash handling and tied-up stock. At medium volumes this eats a large share of margin.
Is a prepay discount profitable?
Usually yes. A 2-5% discount that shifts 20-40% of buyers to prepay costs less than the failed deliveries and cash handling it avoids.
Should I drop COD entirely?
No, especially not for new customers. COD remains the best conversion tool for a first purchase in Nigeria. The goal is to migrate loyal customers to prepay, not to shut out newcomers.
What is partial prepay?
The buyer pays only the delivery fee upfront (via Wave or MoMo) and settles the rest on receipt. This small commitment cuts no-shows by 40-60% because the customer has already invested.
How do I handle customers who abuse COD?
Build a repeat-no-show blocklist and force them to prepay. A few customers cause most failures; identifying them protects your profitability.
Let's talk about your project. We set up your Wave and mobile-money checkout with the right COD/prepay mix to protect your margin in Lagos. 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.
