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Updated January 30, 2023 Reviewed by Reviewed by Erika RasureErika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.
Cash on delivery (COD) and delivery-versus-payment (DVP) describe different procedures and timing of payments given for the exchange of assets, securities, or other goods. Cash on delivery describes a transaction in which the payment of a good or service is made when the good or service is delivered. Delivery-versus-payment is a type of transaction that deals with securities in which the cash payment must be made before or during delivery.
Cash on delivery (COD) generally deals with goods, and the transaction stipulates that the purchaser must pay for the goods when they are delivered. If the purchaser fails to pay for the goods upon delivery, the goods are returned to the seller.
For example, assume a purchaser agrees to make a cash payment for electronic devices that are being shipped from China. The buyer and seller sign a shipping contract which stipulates the buyer makes the cash payment when the goods are delivered. However, if the buyer fails to make the payment, he is responsible for all shipping costs and the goods are returned to the seller. Therefore, the buyer and seller agree to a COD transaction.
Conversely, delivery-versus-payment (DVP)—also known as delivery against payment—is a type of transaction that deals with securities. This transaction stipulates that securities are delivered to a specified recipient only when a payment is made. It is a settlement method to ensure the transfer of securities only occurs when payments are made.
For example, assume an investor wishes to buy the stock of a company and agrees to the DVP settlement procedure. Therefore, the stock is only delivered if the investor pays the agent before or on receipt of the security.
The delivery-versus-payment system became a widespread industry practice in the aftermath of the October 1987 market crash.
Delivery-versus-payment is the settlement process from the buyer's perspective. From the seller's perspective, this settlement system is called receive versus payment (RVP). DVP/RVP requirements emerged in the aftermath of institutions being banned from paying money for securities before the securities were held in negotiable form.
DVP is also known as delivery against payment (DAP), delivery against cash (DAC), and cash on delivery.