PayUPaisa today announced the launch of “release on delivery”, a new payment delivery option for e-commerce merchants in India. Release on delivery or RoD is a payment mechanism wherein the buyer can make the payment which will remain parked with PayU until the buyer is satisfied with the product and gives a consent to release the same.
According to a survey done by PayU, CoD (cash on delivery) constitutes more than 60% of any merchant’s total transactions but they dislike it because the average cost per CoD transaction borne by them is as high as 8% to 10% (as compared to an online transaction which costs 2% to 2.5%). In fact such high CoD charges are eroding the margins of e-commerce firms and pose a serious question on their overdependence on CoD.
Nitin Gupta, Co-founder and CEO, PayU India said, “With the launch of RoD, we are expecting 20% of all CoD transactions to shift to RoD.”
PayU will charge about 2.9% per transaction from the merchants as their RoD fee. The company already has about 50 companies in the pipeline for a possible tie-up. “We plan to add about 100 merchants by the end of this quarter,” Gupta said.
About 20% of the transactions done in the $6 million e-tailing industry are CoD. RoD is expected to reduce the cost incurred through CoD by almost 4 times. RoD is prepaid mode of payment. i.e. a merchant get paid via credit/debit card or Netbanking instantly. In this case payment gateway charges are applicable to a merchant which is between 2% to 2.5%.