New COD Plus model pushes Pakistanis towards cashless future

KARACHI: The e-commerce sector has witnessed exponential growth in recent years, yet one trend has remained largely unchanged: the dominance of cash in online shopping. Despite rapid advances in mobile and internet banking, more than 80 per cent of online orders are still paid through cash on delivery (COD), according to the State Bank of Pakistan (SBP).

The SBP’s data reveals that mobile banking transactions surged to 1.9 billion in FY24, while internet banking users crossed 13.2 million. The infrastructure for digital payments is well in place, but consumer behaviour continues to lag behind, creating challenges for businesses, fintech players, and policymakers alike.

For retailers, a reliance on cash increases last-mile delivery costs, slows down reconciliations, and restricts access to valuable payment data. For fintechs, low adoption of digital rails limits transaction volumes. And for policymakers, cash-heavy commerce undermines efforts to formalise the economy and expand the tax net.

At the heart of the issue is trust. Pakistani consumers, even those with mobile wallets or credit cards, remain wary of paying upfront due to concerns over product quality, failed deliveries, or refund hassles. COD has long provided reassurance, but it also entrenches inefficiencies. Daraz Pakistan, the country’s largest online marketplace, is attempting to bridge this gap with the launch of COD Plus, a hybrid payment model designed around local consumer behaviour. Under this system, shoppers can still order using COD but are given the option to pay digitally at the time of delivery via a secure link sent to their phones.

Explaining the idea, Daraz Managing Director for Pakistan and Sri Lanka Ehsan Saya said: “We are offering a way to pay digitally while preserving the sense of control that comes with COD. Many consumers are not limited by access to digital payments but by hesitation to part with money before receiving the product.” The flexibility of COD Plus could prove crucial. Customers can pay remotely if they are not physically present, settle bills through cards to earn reward points or use mobile wallets when short on cash. For businesses, a shift away from physical currency promises lower cash-handling costs, reduced fraud risks, and faster settlement cycles. Crucially, it also opens the door to data-driven services like customer insights, credit assessments and loyalty programmes. The initiative arrives at a time when the government is also tightening its push for digital adoption. In the latest federal budget, a differential tax was introduced: COD transactions are now taxed at 2.0 per cent, compared to 1.0 per cent on digital transactions. The measure aims to discourage cash usage and encourage formalisation of commerce.

Saya sees COD Plus as complementing such regulatory nudges. “Rather than relying only on regulation or discounting, we are focusing on user-led solutions that build trust and gradually change habits,” he said.