Why cash on delivery is losing ground in Sri Lanka
For years, cash on delivery in Sri Lanka (COD) was the reigning payment method for local e-commerce transactions1. This system became popular for two main reasons: Trust and accessibility. Many Sri Lankan customers, particularly those without bank accounts or credit cards, relied on COD to shop online as it allowed them to inspect the goods before parting with their money.
However, as the market matured, consumer behaviour began to shift. More Sri Lankans started embracing digital payments, driving rapid growth across the sector. According to the Central Bank of Sri Lanka, the nation’s e-commerce transaction value surpassed US $4.61 billion in 2024, with card payments increasing by more than 27%2, a clear sign of the country’s move toward digital-first transactions.
With this growing adoption, the limitations of COD have become harder for businesses to ignore. These include:
- High return rates and delayed cash flow for sellers
- Added processing and reconciliation costs
- Security and efficiency challenges for delivery teams3
These challenges have made COD increasingly unsustainable, particularly for businesses seeking international expansion. Since COD is largely incompatible with cross-border shipping and global fulfillment, many sellers have begun shifting towards more efficient and scalable payment solutions.
To stay competitive, businesses are now embracing prepaid and digital payment solutions that offer faster transactions, reduce fraud, and improve cash flow visibility. More importantly, these systems integrate easily with global logistics networks, allowing merchants to provide smoother checkout experiences and build greater customer trust.
This steady transition away from COD has accelerated the development of a robust electronic payment system in Sri Lanka, empowering businesses to serve both local and international customers with greater speed, security, and efficiency.
