Paytm Mall has revealed a cashback fraud of up to Rs 10 crore. The fraud has been detected by a tool that the company developed in partnership with global professional services firm EY (formerly Ernst and Young), said a Paytm Mall spokesperson.
He said Paytm went for a deeper audit after they noticed some of the small merchants were getting large cashback at Paytm Mall. The auditor detected a cashback fraud, which was committed by a smaller seller and was colluded by junior and mid-level employees. The audit report divulged that they created fake orders to siphon off cashbacks.
Paytm's chairman and chief executive Vijay Shekhar Sharma said, "After Diwali, what my team saw was that there were some small sellers who were getting a large percentage of the cashbacks and we as a team asked our auditors to do a deeper audit."
Furthermore, He added, "The overall size of the fraud is in "double digits", which is "Rs 10 crore for sure". However, a few hours later, spokesperson of Paytm Mall clarified quantum of the fraud would be less. "we would like to clarify that the fraud detected was in the range of Rs 5-10 crore," the spokesperson said.
As a result, Paytm Mall has delisted hundreds of sellers to ensure there are only brand sellers on the platform and few employees have been sacked by the company. "While the number of sellers would reduce, such stringent actions will ensure "better ecosystem" for the consumers," Mr Sharma said.
At the point of criticism of the cashback model making the business unfeasible, Vijay Shekhar said, "The business is "sustainable" but profitability may be some time away as it is spending more on on-boarding users and merchants currently."
In the financial year 2018, Paytm Mall posted a loss of nearly Rs. 1,800 crores on revenue of Rs. 774 crores. The market share of Paytm Mall almost halved in 2018 – to 3 per cent from 5.6 per cent in 2017. Over the past few years, Paytm Mall has been facing massive loss and a tough time in its retail business and there is no relief in sight.