Alternatives to COD in Middle East E-Commerce

As an e-commerce payment channel, cash-on-delivery (COD) is inconvenient for retailers and vendors, entailing complex processes and long payment cycle times. Nevertheless, competing in the Middle East’s online consumer markets without offering cash payment as an option is hardly realistic.

The best way to begin to cut down on cash payments is to provide some locally recognized digital-payment alternatives—and encourage purchasers to use them.

Why Lure Customers Away from COD?

In an earlier post on this blog, we discussed why shoppers in the Middle East have an overwhelming preference for COD. One point worth reiterating here is that, regionally, a lack of trust in digital payment channels exists, particularly concerning data security.

While distrust might be the biggest hurdle to success with e-commerce digital payments, another obstacle relates to regional sensitivities concerning credit—but many emerging digital payment methods don’t require the use of credit cards. The key for online sellers is to promote those methods and engender trust in them.

After all, the more pervasive digital payments become, and the more businesses provide them and make them secure, the more consumers will be encouraged to use them.

Meanwhile, a stubborn refusal to support cash payment can limit your ability to compete. Right now, according to a recent PaymentsSource article, COD sales are still growing in the Middle East. Therefore, it makes sense to accept cash payments, while developing strategies to make the alternatives more attractive to your customers.

Which Digital Payments Work Best in the Middle East?

As the growth of e-commerce in the Middle East has accelerated, so too has the introduction of new online payment solutions. Meanwhile, the unbanked and under-banked population is slowly shrinking, credit card use is on the rise in the GCC, and debit cards are becoming increasingly popular for online purchases.

On the topic of card payment, it’s worth mentioning one further option, which is aligned with local cultural preferences and beginning to catch on with consumers—the prepaid credit or payment card.

Prepaid Credit and Payment Cards

Of all electronic payment methods, prepaid cards, which can be physical or virtual, are enjoying the fastest growth across the Middle East, — nowhere more so than in the United Arab Emirates, where solution provider PayNXT360 says the market for this payment category is expected to be worth $8.6 billion by 2020.

If your enterprise has a physical presence in the region, you might wish to consider accepting some of the popular domestic prepaid cards.

If not, you will still be able to accept payment from prepaid Visa cards and Mastercards via your credit card payment gateway. Prepaid cards offer certain benefits that make them popular with both vendors and shoppers. For example:

• There is no credit involved with the use of prepaid cards
• Security is less of a concern, as potential losses are limited to the balance on the card
• The need to load the cards makes them useful for keeping budgets under control
• Some prepaid products are available even to unbanked consumers
• Enterprises can launch their own branded prepaid card solutions
• Virtual cards are available, which online shoppers can acquire and activate in moments

Other Online Payment Solutions

Aside from prepaid cards, other solutions continue to emerge as superior alternatives to cash-on-delivery. Here are a few examples that you might wish to include in your range of accepted payment methods.

PayPal: One of the most trusted payment providers on the global stage, PayPal is gradually making headway in the Middle East. The main drawback of the globally popular mobile wallet solution right now is the fact that only a few banks in the region support the use of their credit and debit cards with PayPal.

PayFort: If ever there was an “anti-COD” payment solution, it is the PAYatHOME and PAYatSTORE systems introduced by PayFort. These voucher-based schemes enable consumers to pay with cash, but only in advance of shipping. Although they might not spare your enterprise from dealing with cash payments, they do shorten payment cycles and help to minimize customer returns.

CashU: Another mobile wallet similar in many ways to PayPal, the CashU difference is that it was launched expressly to serve Middle East markets. The CashU solution has been around since 2002, so it has had plenty of time to become established as a trusted payment system among consumers in the region. In addition to its digital wallet product, CashU account holders can also take advantage of a prepaid virtual Mastercard, enabling them to shop online with any merchant that uses the Mastercard network.

How to Encourage Electronic Payment

While the careful selection of digital payment solutions is a positive first step, you will need to be proactive in persuading your customers of their advantages. For example, you could charge a small fee for cash payment transactions, or offer discounts or other benefits to customers who pay using your preferred payment channels.

Perhaps more than anything, though, it is crucial to ensure your data security measures are robust, and to tell shoppers about how and why you do that.

That’s because as long as cash payments are an option, it will be security concerns that keep consumers attached to COD. Of course, over time, consumer confidence in digital payments will grow, but enterprises offering reassurance in these early days will be the ones that benefit most from that growth, and enjoy the earliest successes with cash-free e-commerce.