Paytm Mall reports cashback fraud of Rs5-10 crore

Fraudsters have pocketed between Rs5 crore and Rs10 crore in cashbacks, the company has found following a probe into cashbacks earned by small merchants.

Speaking to media, Paytm founder-CEO Vijay Shekhar Sharma said the overall size of the fraud is in `double digit’ and is in range of Rs5-10 crore for sure.
However, an Entracker report citing sources privy to development said the size of the fraud could be in the Rs50-70 crore range.
The fraud was detected through a tool that the company developed in partnership with global professional services firm EY (formerly Ernst and Young), according to a Paytm Mall spokesperson.
He said Paytm went for a deeper audit after it found that some small sellers were getting large percentage of the cashbacks offered at Paytm Mall.
The audit also revealed that a number of employees were colluding with junior employees to earn the cashbacks.
Paytm's losses have mounted to nearly Rs1,800 crore in the financial year 2018 against revenues of Rs774 crore.
At the same time, Paytm Mall’s market share almost halved in 2018 - to 3 per cent from 5.6 per cent in 2017, according to Forrester Research
"Our partnership with E&Y will help benchmark with global best practices as we build a technology driven fraud prevention system to scale our operations," Srinivas Mothey, senior vice president - Paytm Mall, said in a statement on Monday.
"Our teams continue to work closely with E&Y to share our learnings and insights. We are committed to building a trusted commerce platform and will take strict action wherever needed," Mothey added.
Over the past few years, Paytm has been bleeding massively in online retail business.
The company has a business operations team, which works closely with merchant partners to plan and execute cashback offers and promotions leaving a scope for collusion.
"The EY partnership will also undertake audit and fraud prevention using both human and Artificial Intelligence (AI)," said Paytm Mall.
Paytm Mall is far behind the top two e-commerce players in terms of market share. They have a single-digit share against the top leaders which are commanding over 30 per cent market share.
Paytm Mall, with a meager share of the market, has so far managed to raise over $650 million from Alibaba, SoftBank and SAIF Partners.