From Cash On Delivery (COD) To Merchant Account During Covid-19
From Cash On Delivery (COD) To Merchant Account During Covid-19

From Cash On Delivery (COD) To Merchant Account During Covid-19

The decline of cash on delivery has severely affected many retailers in some of the larger country members of the EU.

ShareHIDE

Cash on delivery or cash on demand (COD) is a popular payment method for European shoppers. It protects them against the threat of packages never arriving after online shopping. But government-enforced restrictions have negatively affected many countries in Europe and around the world. The use of cash is limited due to restrictions. Some merchants who once relied on this payment method are facing financial peril as a result.

If you are a merchant facing this predicament, you need to think fast about alternative payment processing solutions. Otherwise, you are soon to be facing the threat of permanent closure. Merchant accounts for accepting credit card payments offer an excellent alternative. They will help to future-proof your business when trading circumstances return to normal.

This post will help those of you in Europe depending on COD to find a way forward by making the switch to contactless payment methods today. So pay attention. What we’re about to tell you could save the future operations of your business!

 

COVID-19 has devastating impact on cash on delivery

Since the outbreak of the coronavirus, cashless and contactless payments have skyrocketed. This is in part thanks to European banks and governments raising limits on contactless payments in person. Online retailers have also expanded their digital payment offerings.

The decline of cash on delivery has severely affected many retailers in some of the larger EU countries. In Italy alone, just under half of all customers prefer COD as a payment method for online purchases. In neighboring countries such as Slovenia, Hungary, Romania, and Slovakia, cash on demand is the most popular payment method. Which makes the cash restrictions particularly painful for online retailers in these countries. They are potentially facing the loss of a huge slice of this market which numbers over 100 million individuals in Europe alone.

The cash on delivery (sometimes referred to as cash on demand) model is effective in many countries. This is thanks to the protection it provides consumers in less secure countries who are worried that their package may never arrive. In practice, the model is very simple to operate too. When shopping online, consumers select their goods, add them to their basket, and select “Cash on Delivery” at the checkout. The customer then pays the delivery driver in cash when the product arrives.

 

Why Coronavirus has adversely affected COD

World Health Organization (WHO) officials recently suggested limiting cash payments to prevent the spread of COVID-19. Since then many organizations have changed reduced the handling of cash.

Postal companies have restricted services and reduced their employees’ exposure to cash. Even click and collect options are now paused. Those in quarantine are unable to leave their house for anything other than essential journeys. Worse still, under government orders many pickup locations have closed.

Thus, the only option left for many retailers is to offer online payment methods such as debit and credit cards. By doing so, they can fall in line with the contactless requirements of the new world we find ourselves in. Those retailers in European countries who have relied on COD for so long are starting to feel these changes bite. They need to take action to save their online orders. But how exactly can they achieve this?

 

During challenging times, it can be tempting to turn to easy-to-set-up third-party payment aggregators such as PayPal for credit card payments. However, those solutions don’t tend to end well for high-risk merchants. Read our guide to find out why payment aggregators are a ticking time bomb for your business!

 

Merchant accounts are an alternative for cash on delivery retailers

COD merchants need to introduce new methods of online payments. By doing so, they can facilitate continued solid growth during the current e-commerce boom. Those who’ve survived thus far will be best served to upgrade to a merchant account. A merchant account can help you to process high-risk payments and card-not-present transactions as well as recurring orders if your business model requires it. It is also one of the best ways to future-proof your business. Particularly if consumers get used to the enforced behavior changes. Many of these changes will become preferred payment methods in the future.

Cash won’t be viewed in the same way. Even across Europe which already leads the globe in terms of COD preferences. Recent data shows that digital wallets such as PayPal and AliPay are already the most preferred payment method. They account for 43% of all European e-commerce shoppers. On the other hand, COD payments only account for 13% of shoppers’ preferences on the continent as a whole. That figure is expected to continue dropping by many experts in the wake of the coronavirus crisis.

The coronavirus is bound to accelerate changes that were taking place in consumer behavior already. One such change is the preference for card-not-present and contactless payments. Merchants who try to depend on COD after the cessation of the lockdowns in place across various countries will struggle. Especially when compared to those who choose to modernize their payment practices.

 

How cash on delivery merchants can secure their own merchant account

The good news is the transition to a merchant account is a relatively simple process. Those using COD for a long time have the added advantage of long and detailed processing histories. With several months of bank statements, merchants can demonstrate their business viability to acquiring banks.

Acquirers need to see that your COD transactions will transfer over to credit card and other forms of online payment. With insufficient evidence, they may deny access to a merchant account. Acquiring banks base their decisions on risk. Let’s say they deem your transactions as high-risk payments. They will likely increase related processing fees to reflect elevated risk. Thankfully, there are providers who specialize in securing merchant accounts for high-risk merchants.

How do you know if you are a high-risk merchant? One way is to look at your products. For example do you sell health supplements with controversial ingredients? Do you offer digital content, home electronics, or several other products/services online?

Providers like DirectPayNet specialize in securing merchant accounts. Our solutions save you the headaches, temporary suspensions or shut downs that come from Stripe or PayPal as your business scales.

 

COD merchants can act now to secure their future

Cash on delivery or cash on demand has been a popular payment method in Europe for decades. But the outbreak of the coronavirus has accelerated its decline. What’s more, it’s likely that the enforced changes of today will become the preferred consumer habits of the future. Basically, COD merchants that don’t act now to upgrade to their own merchant account will struggle once the virus recedes.

DirectPayNet has decades of industry experience in upgrading high-risk businesses to merchant account status. Better yet, we continue to operate during these unprecedented times. We are available to answer any questions you may have about securing a merchant account.

Email our team right now to get the ball rolling!

About the author

I serve as the portfolio manager and operations assistant at DirectPayNet. Prior to helping high-risk merchants navigate credit card processing and compliance, I gained extensive experience in affiliate marketing for several online retail verticals (including education, health, insurance, sports and gaming). In 2016, I became a certified fraud examiner (CFE). You can email me with any questions about merchant accounts.