Payment gateway solutions company PayUPaisa announced the launch of an online payment solution called 'Release on Delivery' (RoD) in a bid to reduce the eroding margins in e-commerce businesses due to the extra costs generated by Cash on Delivery (CoD).

PayUPaisa claims that RoD will be a win-win solution for both online shoppers and merchants. To a buyer it provides the same trust as CoD. While for a merchant, it’s prepaid medium to accept online payments and reduces the expenses done via CoD by almost four times.

As per a survey conducted by PayUPaisa, 60 per cent of e-commerce transactions happen via CoD. However this is not a very profitable option for a merchant as the average cost per CoD transaction is 8 to 10 per cent.

The causes for consumers opting for CoD ranged from lack of trust to convenience factor. 75 per cent consumers attributed their choice of CoD to lack of trust while the other 25 per cent attributed it to sheer convenience.

How does RoD work?

When a consumer will reach the payment page of an e-commerce site and selects CoD, he will also be shown the option of RoD. RoD will allow the customer to pay via credit card, debit card or netbanking. However the payment made is not released to the merchant immediately and is instead held back till three days from the delivery of the product.

In case the consumer does not respond in three days, PayU's RoD releases the payment to the merchant by default. In case a consumer faces some problem with the product received, he can raise a dispute with PayUPaisa's dispute resolution team, which will either resolve the matter in 12 working days or refund the money.

Benefits for merchants

PayU's RoD claims to reduce the gateway charges for merchants to anywhere between 2 to 2.5 per cent. Also RoD eliminates any possibilities of buyer's remorse i.e. a buyer choosing not to honour an order as the payment has already reached PayU's escrow account (account with money held by a third party on behalf of transacting parties).

Benefits for buyers

RoD will offer the following beneifts to consumers:

• - More control as money can be held back till after 3 days of recieving the product.
• - In case of mismatched expectations, buyers can raise a dispute with PayuPaisa.
• - Faster refunds- in two days time.
• - Store card details with PayU's store card feature and checkout faster next time on.

PayU India’s Co-founder & CEO, Nitin Gupta said “The largest pet supplier e-commerce merchant in India, Dogspot.com, went live with this and without any promotion, 7 per cent of all CoD transactions shifted to RoD. Large merchants like Tradus, The Mobile Store etc are eager to go live on this payment option. We expect that in 9-12 months time, 20 per cent of all CoD transactions will become RoD transactions.”

PayUPaisa claimed that 38 per cent of the market share (active merchants) is using its services and it currently has 50 merchants in the pipeline who will be making RoD available on their sites in the coming days.