Cashback Scam Hits Paytm Mall; Their Own Employees Created Fake Orders To Take Cashback!

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Past 7 to 8 months have not been a joyride for Paytm, as several crisis have been hitting it almost alongside each other. Now, Paytm’s e-commerce arm, Paytm Mall, which has already had trouble slagging and slipping into financial troubles since the beginning of the year, has yet another problem reported in, this one being a major show-stopper, as it now finds itself amidst another bad publicity.

Rattled by frequent cashback fraudulent incidents involving its staff, Paytm Mall has now announced a partnership with Ernst and Young(EY) to conduct a forensic audit within the company, as the company has been smashed with a massive loss, due to this in-house cashback scam.

All About Paytm’s Cashback Scam

It has come under notice that Paytm has found out that some of its junior to mid-level employees have interacted with several third party vendors to create fake cashback orders. Thus, Paytm has hired EY to conduct detailed forensic audit of Paytm Mall. If reports are to be believed, EY’s forensic audit has already led to suspension of 20-25 employees from the company.

Paytm works closely with merchant partners for cashback and promotions. The involved employees conspired with these third-party vendors to create fake small-sized orders to steal cashback offers and later earn them by bribes. The orders were small so that the pattern couldn’t be deciphered. The exact amount of fraud or scam is still not known but forensic audit is conventionally conducted when the fraud is more than $2 million. EY is creating a ‘Technology Driven Fraud Prevention System’, which will also undertake audit and fraud prevention using both human and Artificial Intelligence.                 

EY’s Sophisticated Technique

Comprehending to the massive losses it incurred, Paytm conducted an annual audit where the pattern of fraud first came to light. A forensic audit is an examination and evaluation of a firm’s or individual’s financial information for use as evidence in court. About 100 employees have been grilled by the EY team. This audit included vigorous scanning of employees’ emails and chats to ascertain their involvement in any irregularities. Importantly, employees are asked to furnish consolidated bank statements to know whether they have received any kickbacks.

Paytm has incurred a loss of nearly Rs 1,800 crore in the financial year 2018 and has also cut short on its market share to 3% from 5.6% in 2017. The deal of a forensic audit is a serious case because until now, Jabong has been the only company to have undergone a forensic audit. With PhonePe and Google Pay catching up to its market share, the future of Paytm doesn’t look bright, not until the final report of the audit is out. 

Paytm Mall is already far behind its two deeply rooted competitors, Amazon and Walmart owned Flipkart. With news like these, it might soon lose its current value in the ecommerce market too.