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Cashback scam worth at least Rs 10 crore: Paytm CEO

The fraud that has been brewing at Paytm Mall since months is being probed by consulting and audit major Ernst & Young

May 15, 2019 by The Passage Team
Cashback scam worth at least Rs 10 crore: Paytm CEO

Noida-based payment company Paytm has been shrouded in one bad news after another for the past few months. It began with Vijay Shekhar Sharma’s personal assistant and media manager Sonia Dhawan’s alleged involvement in extortion and data theft case.

Then the news of Paytm wanting to shut down its e-commerce arm Paytm Mall started to make rounds. On multiple occasions Sharma denied any plan of shutting down Paytm Mall.

While dealing with the negative PR, Sharma was dealing with something nastier — a cashback fraud to the tune of Rs 10 crore, planned by its own employees and hundreds of sellers.

The cashback fraud that has been brewing at Paytm Mall since months is currently being investigated by consulting and audit major Ernst & Young.

During an event in Mumbai, Sharma said the scam involved hundreds of sellers and tens of employees.

Paytm claims to have 12 million merchants and over 300 million customers.

According to a Mint report, Sharma said the fraud involved fake transactions between merchants and junior employees to make undue gains from cashback offers. The sellers have been blocked and the employees have been fired.

To prevent such frauds again, Paytm plans to make its seller registration more stringent. It is, however, not putting a break on the cashbacks.

Paytm Mall has so far raised USD 650 million from Alibaba, SoftBank and SAIF Partners, with Alibaba group arm Ant Financial holding a 42% stake in Paytm Mall. Alibaba also holds a large stake in Paytm’s parent, One97 Communications. Economic Times has reported that Alibaba was uncomfortable to pump in more capital to support its cashback based e-commerce business model.

Sharma also mentioned that the company is waiting to acquire 500 million customers and 45-50 million merchants to become profitable.

The e-commerce company has not been doing too well in a market dominated by Amazon and Walmart-Flipkart, despite being one of the fastest internet companies in India to become a unicorn.

Paytm Mall’s market share fell from 5.6% in 2017 to 3% in 2018, according to Forrester Research. Paytm Mall has reported loss of Rs 1,787.55 crore on a total revenue of Rs 774.86 crore in 2017-18.

In an e-mailed statement earlier, Paytm Mall said that EY will "undertake frequent audits to identify, analyse and monitor various in-built and outsourced processes". It will also recommend global practices that will be applied to build a tech-driven fraud prevention system.

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.

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