How Smart Brands Increase Prepaid Orders & Reduce COD RTO Losses (Complete Strategy Guide)

Key Takeaways:

• COD is getting more expensive for brands, as customers place impulse orders, fake COD requests, doorstep refusals, and low-intent buyers pushing RTO rates up to 30-40 percent.
• Prepaid conversions significantly improve margins by lowering RTO, speeding up delivery, reducing reverse logistics, and improving cash flow.
• Smart prepaid nudges work better than forced prepaid; removing COD option won’t increase your prepaid orders, it would increase drop-offs.
• Small UPI discounts, COD fees, faster delivery, and trust elements outperform aggressive discounting.
• Brands that optimise prepaid now will gain a long-term competitive edge in India’s D2C landscape.

Introduction

The growing prepaid vs COD battle is becoming a turning point for D2C brands. Growth is no longer about attracting more customers; its about increasing prepaid conversion rates.

As COD still dominates in India in 2025, COD RTO reduction is one of the major focus areas for brands.

As logistics costs rise and competition tightens, prepaid order conversions are not optional. Smart brands are shifting from COD-heavy models to prepaid-first systems using prepaid nudges, UPI checkout optimisation, AI tools for prepaid conversion, and COD-to-prepaid flows.

If you want to know how your brand can increase prepaid orders and reduce RTO, this complete strategy guide is for you. We won’t talk about basics like offering multiple payment options, but actual actionable plans that will ensure higher prepaid order conversion.

The Growing Problem With COD in India

COD RTO reduction is a huge problem for Indian D2C brands. Indians automatically incline towards COD for many reasons. Around 30-40% COD orders result in RTO, while in prepaid orders, the RTO rate is only 5-7%.

COD RTO is Rising

Cash on Delivery continues to drive higher RTO rates because shoppers often order impulsively when no upfront payment is required. This leads to fake, incomplete, or low-intent orders that never convert.

Many customers also refuse the package at the doorstep or simply change their mind because they have nothing to loose.

Trust issues are also a major factor behind the high COD in India.

Combined, these behaviours make COD one of the biggest contributors to rising RTO for Indian D2C brands.

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How COD Impacts Business KPIs?

Many businesses, especially D2C brands, struggle with cash on delivery problems.

High COD contributes to:

• Shrinking margins
• Higher logistics cost (reverse logistics)
• Increased CAC
• Wasted inventory cycles
• Working capital blockage

If a  1,200 product gets refused, delivery attempted twice, and returned:

• Forward shipping:  60 rupees
• Return shipping:  60 rupees
• Packaging loss:  20 rupees 

Packaging loss:  20 rupees

Total loss per RTO order =  140 rupees

That’s a ~12% margin wiped out on one order.

This was just the straightforward amount you lose with every RTO. But, if we consider the opportunity cost, it’s much higher.

Add Opportunity Loss:

If 300 orders are returned, it blocks:

• Inventory
• Warehouse space
• Cashflow
• Last-mile bandwidth

If your margin is  200 per order, you also lose 300 × 200 =  60,000 in unrealized profit.

What is Prepaid Order?

Prepaid order means the order for which the customer pays in advance on your website instead of choosing to pay after delivery of the product.

Why Prepaid Order Conversions Matter in 2025

Prepaid orders drastically reduce RTO, improve cash flow, and make your operations more predictable. In 2025, they help brands optimise margins, deliver faster, and build a more reliable base of high-intent customers. Here’s why prepaid order conversions matter:

1. Reduces RTO by 60 to 90 percent

Prepaid orders almost eliminate casual and fake orders since the customer is already financially committed. Most Indian D2C brands report COD RTO of 25 to 40 percent while prepaid RTO stays below 5 percent. This single shift protects margins and stops daily leakage of shipping and return costs.

2. Boosts Cash Flow

With prepaid, money hits your account immediately instead of getting stuck in the COD cycle for 20 to 35 days. Faster inflow means you can reinvest quickly in inventory, ads, and growth without borrowing or burning cash on credit cycles.

3. Improves Delivery Speed

Prepaid orders are processed faster because they skip the COD verification step and have lower refusal risk. Couriers also prioritise prepaid shipments since they convert on the first attempt more often. This leads to quicker deliveries and better customer satisfaction scores.

4. Enhances Operational Efficiency

When COD drops, delivery failures, reattempts, and reverse pickups also reduce. This gives your operations team more bandwidth to focus on scaling, quality checks, and customer experience instead of firefighting RTO issues every day.

5. Enables Better Customer Profiling

Prepaid customers show higher intent and repeat more often, giving you cleaner behavioural data. Brands can identify high-value segments, build better retention journeys, and optimise marketing spends because prepaid eliminates noisy data from fake or low-intent COD orders.

How Smart Brands Are Winning the Prepaid Battle

The top D2C brands in India are adopting some smart strategies to reduce RTO in ecommerce.

1. Trust-Building Strategies

When your website looks trustworthy, your shopper won’t hesitate to place a prepaid order. Add social proof, reviews, or UGC to build trust. You can also add verified badges and trust marks.
Along with this, clear shipping, refund & return policies will ensure that your shoppers don’t feel cheated because of hidden terms and conditions.

2. Payment UX Optimization

A complicated user experience can irritate your shoppers and lead to COD orders. Make sure your payment process is quick and simple, so shoppers don’t resort to COD.

Implement

• 1-click checkout
• Multiple payment options (UPI, wallets, BNPL)
• Auto-fill and saved payment tokens

3. Smart Prepaid Nudges

If you shopper gets no incentive for prepaid orders, why would they change their preferred COD habit? This is why prepaid nudges are important.

• Small discounts for prepaid: Nudges shoppers to pay for financial perks.
• Free shipping for prepaid: You can offer free-shipping to prepaid customers.
• Prepaid-first offers: You can inform your shoppers that prepaid orders get faster deliveries, which might push them to  avoid COD.
• Limited-time UPI cashback: Instead of discounts, you can offer cashbacks on certain platforms, which will encourage them to choose the prepaid option.

This is how you can reduce COD orders and increase prepaid.

4. COD-to-Prepaid Conversion Flows

By enabling a smooth flow from COD to prepaid, smart brands are reducing their COD order. COD confirmation OTP, smart nudges post COD order, sending COD-to-prepaid upgrade link via WhatsApp/SMS, and sharing prepaid conversion reminders with urgency triggers can convert a COD order into a prepaid order before the delivery. This will help you win the prepaid vs COD battle.

5. Risk-Based COD Restriction

The highest risk of RTO lies in COD orders from remote locations. The easiest way to prevent this is by limiting COD in high-risk pin codes.

You can also use predictive analytics to discover repeat RTO customers and restrict their COD options. Automation and AI-based fraud detection can also help you reduce the risk of RTO by scanning and highlighting fake-looking orders, repeat defaulters, or other red flags.

Personalization & AI in Prepaid Conversions

Dear D2C founder, if you are not using LLMs and AI to increase your profits in 2025, you are literally leaving money on the table. You’re making the game harder for yourself and losing profits you could easily unlock.

Let us tell you how you can utilise AI to increase prepaid conversion rates:

• AI intent scoring
• Predicting prepaid vs COD probability
• Personalized checkout flows
• Smart COD blocking
• AI-driven nudges (WhatsApp, SMS, Email, Push)

COD-to-Prepaid Conversion Strategies That Actually Work

Your prepaid conversion optimisation starts right at the checkout. If you can nudge the shopper to place a prepaid order instead of COD, you can save roughly 30–40% on RTO.

Wondering how to convert COD orders to prepaid automatically? Here are the best strategies to reduce RTO in ecommerce:

1. Behavioral Nudges

You can monitor and nudge the behavioir of your consumers by understanding the consumer mindset. When you provide prepaid offers that increase conversions, you can change consumer’s mindset towards prepaid.

(a) Countdown timers

Countdown timers can create a sense of urgency for the shopper. Brands use this as a strategy to convert COD order to prepaid ones.

A timer can show that a small UPI discount or prepaid reward is available for a short time.

Example:

“Get 30 off on UPI if you pay within 03:00 minutes.”

Why it works: shoppers don’t want to “miss out” on free savings.

(b) Scarcity triggers

Only ‘xx’ items left in stock! This statement can trigger a purchase as shoppers see a limited window to make the purchase. This works especially well for apparel, seasonal launches, and viral products.

(c) Delivery date guarantees

Indian customers often choose COD due to trust issues. That’s why giving a clear promise works extremely well.

At checkout, add:

“Prepaid orders delivered by Friday”

“Get assured 2-day delivery when you pay online”

Brands like Lenskart, Sugar Cosmetics, boAt and several D2C brands use “Guaranteed Delivery Dates” to increase online payments.

2. Incentive Mechanisms

Incentivising prepaid orders is one of the most effective ways for prepaid order conversion optimisation.

(a) 20-50 UPI discount:

Offering discounts or cashbacks on UPI can encourage people to pay online for the ‘extra’ savings.

(b) Bonus loyalty points:

Prepaid orders can get loyalty points or credits which they can redeem in their next order.

(c) COD convenience fee:

This is becoming a standard practice across D2C industry. Charging  10–30 as a COD convenience fee pushes users to think twice before selecting COD. This works especially well when paired with “Pay online to avoid the COD fee.” Top brands use this to reduce fake orders, impulse purchases, and overall RTO.

3. Communication Automation

Automate the communication for impactful results without investing a lot of human-hours in follow-ups.

(a) WhatsApp flows:

Brands using automated WhatsApp flows often see 20–35 percent COD-to-prepaid conversions.

Use messages like:

• Instant message after COD order: “Confirm your order. Pay online now and get faster dispatch.”
• Reminder messages with smart payment links
• Delivery date promises for prepaid payments

(b) IVR calls:

For high-ticket items or COD-heavy categories, you can choose IVR to verify customer seriousness.
A proper COD confirmation flow cuts down fake orders and helps in COD RTO reduction substantially.

(c) Smart payment links

Send a message immediately after checkout: “Complete your payment in one tap to secure priority delivery.”

Smart links support:

• UPI
• Wallets
• Cards
• BNPL

These links reduce friction and work especially well when combined with small incentives or early-delivery promises.

Tools & Technologies Brands Use (2026 Landscape)

Tools and technologies like AI checkout tools, WhatsApp commerce tools, RTO prediction platforms, etc., will be a huge part of the 2026 D2C landscape. Top ecommerce brands use these tools for their advantage. These are the top prepaid conversion tools for D2C brands:

1. AI-Driven Checkout Optimization Tools

Brands are increasingly using AI to personalize checkout flows. These tools analyze user behavior (cart value, time spent, device type) to decide which nudges to show, like offering a UPI discount or showing a countdown timer for limited offers.

AI can also test different layouts (A/B testing) in real time and adapt the checkout UI for better conversion based on past data.

2. WhatsApp Commerce & Automation Tools

India has more than 850 million users of Whatsapp.

Given the high adoption of WhatsApp in India, brands leverage WhatsApp-based flows to drive prepaid payments. This includes sending payment links, reminders, and delivery-date guarantees post-checkout.

Automation platforms can trigger transactional messages, like “Confirm now and pay online for priority dispatch”, abandoned-cart reminders, or promotional offers.

3. Payment Optimization to Increase Prepaid Orders

One of the biggest factors behind high COD is lack of affordability. The middle-class of India cannot afford high-ticket purchases which often leads to drop-offs, cart abandonment, or COD orders that will end up in RTO.

You can solve all these problems with just one tool - Snapmint. Snapmint is a pay later and EMI platform that offers an affordability solution to your shoppers.

Snapmint provides instant, no-cost or low-cost EMI to customers at checkout without needing a credit card. Because Snapmint spreads the cost over monthly payments, it makes higher-value products more affordable. 

4. RTO Prediction and Analytics Platforms

RTO fraud detection intelligence tools use machine learning (AI/ML) to predict which orders are most likely to return (RTO) by analyzing historical data: pin codes, customer purchase history, preferred payment method, and past return behavior.

With predictive scoring, brands can take proactive actions, for example, selectively nudging high-RTO-risk customers to prepay, adding confirmation calls, or applying COD limits,  thereby reducing overall reverse logistics costs.

5. Personalization Engines & Recommendation Tools

To improve average order value (AOV) and conversion, D2C brands use recommendation engines powered by AI. These tools suggest complementary products (upsell/cross-sell) in checkout or cart, making it more likely for the customer to add on.

Case Studies / Examples

Example 1: Lifestyle Brand

Brand Hasan Oudh witnessed a 6% increase in prepaid order by offering EMI on UPI to their customers.

With easy affordability for tier 2+ customers, there was a significant reduction in COD orders and RTO for the brand.

Example 2: Beauty Brand

Juicy Chemistry, a popular organic beauty brand in India, was struggling with high RTO and low prepaid orders. With Snapmint integration, Juicy Chemistry was able to lower their COD.

The brand saw 10% increase in prepaid transactions.

The Co-founder & CEO of Juicy Chemistry, Pritesh Asher, said, “We’ve witnessed a remarkable 10% rise in prepaid transactions, reflecting the growing trust and convenience Snapmint offers. It has particularly resonated with younger and working professionals.”

Check out more case studies to unravel how leading brands attain growth.

Step-by-Step Blueprint to Increase Prepaid Conversions

Wondering how to increase prepaid orders? With our proven COD to prepaid conversion strategies, you can reduce COD RTO and increase prepaid orders.

Step 1: Fix checkout friction

Your checkout should be smooth and friction free! This is the first step of your COD to prepaid conversion strategy.

Reduce form fields, enable autofill, and simplify steps so customers can pay in under a minute. Remove any unnecessary popups, speed up page load, and make the UX consistent across devices.

Nothing on your checkout page should nudge the shopper to quit!

Step 2: Introduce No-Cost EMI Options Like Snapmint

Snpamint is a growth lever for D2C brands. You can get 10X growth by integrating Snapmint pay later and EMI.

Clear EMI breakdowns on product and checkout pages help customers see affordable monthly payments. Snapmint’s cardless, no-cost EMI shifts users away from COD.

This prepaid conversion strategy works well for brands with high-ticket items.

Step 3: Add trust elements

If the shopper doesn’t trust the brand, he/she will automatically incline towards COD. So, your Step 3 should be to display delivery dates, money-back guarantees, secure payment badges, and verified customer reviews at checkout. 

Step 4: Add prepaid incentive

The best way to make a shopper pay in advance is to make them feel that prepaid = savings!

Prepaid incentive ideas like small UPI discounts, bonus loyalty points, or waived shipping for prepaid orders to make the value difference obvious will solve your cash on delivery problems.

Step 5: Build COD-to-prepaid flows

Make it easier for shoppers to turm COD orders into prepaid by sending WhatsApp/SMS payment reminders with one-tap payment links.

You can also run IVR confirmations that offer instant prepaid upgrades.

Step 6: Use AI-based risk scoring

Mitigate your RTO risk with AI-based scoring. This not only reduces ecommerce losses but also optimises prepaid order conversions. Use targeted actions like mandatory OTP, COD limits, or prepaid nudges for high-risk orders.

Step 7: Analyze & iterate

Last step is to analyse the metric and take actions accordingly. Track metrics like prepaid share, RTO rate, CAC, conversion funnel regularly to see impact of the tool and technology that you use.

Use learnings to refine thresholds, messaging, and offers. This small effort will have big effect to increase prepaid orders.

Common Mistakes Brands Make

Smart brands learn from the mistakes of others! From your UPI checkout optimization to RTO fraud detection and COD confirmation flow, here are some common mistakes that you must avoid to upscale your brand: 

1. Forcing prepaid (reduces conversions)

Many brands try to reduce COD orders and increase prepaid by removing Cash on Delivery entirely, but this backfires.

Forced prepaid reduces conversions, increases drop-offs, and worsens COD RTO reduction efforts because shoppers feel pushed instead of nudged.

2. Overusing discounts

Heavy discounts might boost prepaid orders temporarily, but they hurt margins and train customers to wait for offers.

Smart prepaid incentive ideas involve subtle value adds, not constant price cuts. Prepaid nudges like faster delivery, loyalty points, or COD fees is better than offering discounts all the time.

3. Poor payment UX

A clunky checkout kills prepaid conversions faster than any bad offer. Missing UPI options, slow loads, and unavailability of one-tap payment methods make customers default to COD even when they intended to prepay.

UPI checkout optimization is non-negotiable in India.

4. Not testing the COD upgrade flows

Not experimenting or not testing are a brand’s sure shot way to kill profits! Most brands don’t experiment with how to convert COD orders to prepaid automatically, like WhatsApp payment links, IVR confirmation, AI-driven nudges, or personalised reminders.

Without testing, you never discover which prepaid conversion tools for D2C brands actually work for you.

5. Not tracking RTO by geography

RTO is never uniform. Risky pin codes, regions with repeated delivery refusals, and first-time buyers need different strategies. Brands that don’t map COD RTO reduction data by city, pin code, or user type miss obvious patterns and overspend on unnecessary COD shipments.

Also Read: Top 10 e-commerce mistakes to avoid when scaling your business.

Conclusion: Future of Prepaid Conversions in India

The prepaid landscape is about to accelerate as UPI continues to dominate everyday payments, making online checkout faster and more familiar for shoppers.

As per government data, there are over 491 UPI users in India in 2025. UPI powers 85% of all digital payments in India. 

You can utilise this robust growth of UPI in India by offering EMI on UPI to your shoppers. Embedded finance solutions, from instant EMIs on UPI to one-click pay later options, will further reduce friction and boost confidence. 

Instant refunds, smart delivery date guarantees, and zero-friction payment flows will define the future of prepaid conversions.

With instant refunds becoming standard, customers won’t hesitate to prepay. 

Smart delivery date guarantees will add trust, while zero-friction payment flows powered by AI and automation will make prepaid the default choice for most buyers. 

For D2C brands, the brands that master prepaid conversions early will win on profitability, lower RTO, and smoother customer experience.

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