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Tad Tilahun

February 2021

Senior Vice President, Head of Product & Solution Delivery, CEMEA, Visa.


5 - 6 Minutes

Digitising cash on delivery: A growing acceptance of digital payment solutions

The COVID-19 pandemic has been a catalyst of change in the payments industry and a new reality is here to stay. eCommerce, which was already booming in CEMEA, has seen an extra uptick from COVID-19, with both merchants and consumers turning to digital payment methods during a time when many stores remained closed and consumers have stayed indoors.

“According to a recent Visa study1, 38 per cent of merchants surveyed in Saudi Arabia, and just under a third in Russia, have acquired or developed an eCommerce platform as a direct result of COVID-19. The study also shows that two-thirds of consumers in the UAE and Saudi Arabia, and more than seven in ten in Kenya, say the pandemic has led to their first experience of online grocery shopping, with similar numbers making their first online purchases from pharmacies,” says Tad Tilahun, Visa’s Senior Vice-President and Head of Product & Solution Delivery for CEMEA.

However, cash on delivery still remains a preferred form of payment with many customers. Although electronic payments at checkout are increasingly available when ordering online, the purchasing process in CEMEA is not always truly digital end-to-end.

Visa research2 and public reports show that consumers in CEMEA display a greater reluctance to pay for goods until they’ve seen them, even when they’ve ordered online. "The primary reason for this is that people want to physically see the goods to ensure they are happy with the product, the quality matches their expectations, and they have the goods in their own hands before they confirm the payment," says Tilahun.

In a study conducted by Visa last year3, 92 per cent of consumers surveyed who normally favour cash said they'd pay electronically if a mobile PoS payment option or another digital payment method was available on delivery.

Growing demand for digital payment solutions

Since the pandemic, not only has eCommerce seen a surge, but consumers are also starting to demand digital payment methods over cash for reasons spanning both simplicity and hygiene. Six in ten online shoppers surveyed in the UAE say that they now prefer to use cards or digital payment methods compared to physical cash on delivery for online purchases.4

Meanwhile, merchants and delivery firms are also equally keen to move their operations away from cash and to digital as it streamlines processes and reduces cash-handling costs.

“In response, Visa’s design and digital solutions teams have built out a number of solutions that give people the comfort of digital payments at the time of delivery when they have seen the goods and are ready to pay," says Akshay Chopra, Visa's Vice President Innovation and Design for CEMEA.

"Our hypothesis is that when consumers do this again and again, they will eventually reach a place where they have trust in both the system and the merchant and will be comfortable to put their card on file."

“We are advising merchants to adopt a gradual approach in converting cash payments to pre-payments. Start by offering digital payment options at the time of delivery in order to eventually transition consumers, and work backwards through the consumer journey,” says Chopra.

Empowering the customer

There are a number of ways to give the customer confidence that they won't have to pay until they're satisfied with the goods. The ideal payment solution, of course, will vary from merchant to merchant. (see box).

One method is to pre-authorise a payment at the time of purchase and then process it on delivery, in the same way as hotels lock an amount on a card at the time of booking.

Another method allows goods to be received without the physical presence of the purchaser.

"Customers store their card details with the merchant or the delivery company, complete the checkout process and then at that point in time they get either a one-time password (OTP) or a QR code," explains Tilahun. "Then in a few days, when the delivery man is at the doorstep, from his app he can either scan the QR code or ask the customer for the OTP number in order to initiate the payment process."

Another method that digitises cash on delivery is a new solution called Tap-to-Phone, which sees delivery staff equipped with payment apps on their mobile devices, and enables greater digital payment acceptance even for the smallest of merchants.

"Today, when consumers go into a merchant or a restaurant and want to pay, they can tap on a PoS device," explains Tilahun. "We're working to enable acceptance on Android devices, meaning that merchants can download an app onto their mobile devices so they can accept payment direct from consumers’ payment cards or contactless devices."

There’s no one-size-fits-all payment method but there are wide ranging solutions available to help meet the differing requirements and capabilities. By digitising the cash on delivery payment method, Visa is helping both consumers and merchants transition to a cashless society.

The Cash on Delivery transition - solutions to support merchants

Visa has developed several solutions and solution concepts to meet different merchant needs:

  1. Soft PoS - Here, consumers select 'Payment by Card Delivery' at checkout. They can pay by card at delivery by using Software Point of Sale (Soft PoS) which enables acceptance of contactless payments on mobile devices without the need for a full payment terminal.
  2. Pre-auth - With this solution, the consumer authorises transactions in advance with card-on-file. A hold is placed on the card, but no charge is made until the goods are received. Only once delivery has happened, can the payment be automatically initiated, and the consumer accepts the package with no further action required.
  3. Deliveryman initiated - The consumer selects 'Payment on Delivery' at checkout and receives a one-time password from the merchant. This password is given to the deliveryman when the goods are accepted, at which point the card is charged.
  4. Customer initiated - Payment is triggered by the customer at the time of delivery through a prompt to the customer from the merchants app.
  5. Third-party app - After selecting 'Payment on Delivery' at checkout, customers can pay via a third party app by scanning the QR code on the package once delivered.

Visa works with strategic partners to enable these solutions. One of the latest examples is a collaboration with Portmone, the leading Ukrainian financial service provider, which brings new technological and innovative solutions to the Ukrainian market. Pay on Delivery, entitled ‘Safe Delivery’ will be launched in Ukraine soon and is another important milestone in eCommerce and delivery development.

“At Portmone, we are always trying to find solutions that will accelerate the digitalization of payments. By analyzing the reasons why people are still using cash on delivery, we can better understand the barriers to digital payments and help find solutions. “Safe Delivery” is a solution that we believe will help eliminate the usage of physical money for online purchases in the future.

‘Safe Delivery’ will improve the customer experience as it enables digital payment for online purchases at the time of delivery, giving the consumer confidence in the items being delivered whilst providing them with full control of the payment process. The solution will also enable a digital payment of the full amount including shipping costs as well as payment for items priced based on weight, such as groceries.”

Dmytro Basov, CEO, Portmone

All brand names, logos and/or trademarks are the property of their respective owners, are used for identification purposes only, and do not necessarily imply product endorsement or affiliation with Visa.

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