Digital Payments major Paytm’s e-commerce marketplace arm Paytm Mall is reportedly investigated a cashback fraud, which involved employees of the company. According to an Economic Times report, the company has roped in auditor Ernst & Young(EY) to investigate the fraud.
Junior to mid-level employees reportedly colluded with third-party vendors to create fake small-sized orders, a fake list of vendors and customers to steal cashback offers. Involved employees received kickback from these vendors for their ‘assistance’, the ET report states, quoting sources.
Since the orders were of a smaller size, they reportedly weren’t noticed by the management for a long time. “There was a circle of orders, vendors, and consumer profiles that were essentially circling back to each other many times. Even after losing some money for cancelling orders, the cashback in volumes made significant gains,” ET quotes a source as saying.
Paytm Mall, which was founded in 2016 faces massive competition from deep-pocketed Amazon and Flipkart. In a bid to attract and retain customers, Paytm Mall offered massive cashbacks on its platform.
However, with Paytm Mall making massive losses, it conducted an annual audit where this pattern first came to light. Post this, Paytm Mall roped in EY to do fraud prevention audit for it. It announced recently that it was entering into a partnership with EY to build a fraud prevention system for its customers and partners. It announced that it will undertake frequent audits to ‘identify, analyse and monitor various in-built and outsourced processes to recommend global practices.’ The idea here was to build a tech-driven fraud prevention system to identify fraud merchants and weed them out.
However, this announcement didn’t mention or specify any fraud that the company identified.
EY’s audit and a possible fraud was first reported by Entrackr on May 9. It reported that EY found lapses and informed Paytm Mall about a potential scam involving employees. “…sources emphasised some employees connived with service providers and that resulted in a huge loss for the company,” the Entrackr report states.
Nearly 100 employees were reportedly grilled by EY where their email and chats were scanned to ascertain their involvement in any irregularities.
In a response to ET’s queries, the company said that the company has a business operations team that works closely with merchant partners for cashback and promotions. This, the company said, leaves scope of collusion, which EY will investigate for using both human and artificial intelligence. However, the scope of the fraud has not been revealed yet.