Em­ploy­ees, sell­ers col­luded in cash­back fraud, says Paytm

Hindustan Times (Patiala) - - Business - Rid­hima Sax­ena rid­[email protected] n

The re­cent fraud at Paytm Mall, the e-com­merce mar­ket­place arm of Paytm, in­volved hun­dreds of sell­ers and tens of em­ploy­ees, said Paytm founder Vi­jay Shekhar Sharma.

The fraud, which in­volved fake trans­ac­tions be­tween mer­chants and em­ploy­ees to make un­due gains from cash­back of­fers, is es­ti­mated to be to the tune of ₹10 crore, Sharma said on the side­lines of a press meet in Mum­bai on Tues­day. “I don’t know the (ex­act) amount but, it will be ₹10 crore for sure,” said Sharma.

Since its in­cep­tion in April 2017, Paytm Mall has raised $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.

On Mon­day, news agency PTI re­ported that the com­pany had ap­pointed con­sult­ing and au­dit firm EY to in­ves­ti­gate the cash­back fraud. The investigat­ion has been go­ing on for al­most a fort­night and some em­ploy­ees have al­ready been fired, it added.

“We found out that there were some sell­ers who were col­lud­ing with some em­ploy­ees at the ju­nior level and they sort of got more cash­backs on their prod­ucts, so we blocked those sell­ers and fired those em­ploy­ees,” said Sharma.

The on­line re­tailer plans to make its seller reg­is­tra­tion process more strin­gent in order to

THE PAYTM MALL FRAUD IS ES­TI­MATED TO BE TO THE TUNE OF ₹10 CRORE, SAID PAYTM’S SHARMA

curb such frauds in the fu­ture.

“We first used to be­lieve that ev­ery seller should be able to sell on Paytm Mall. Right now we are strin­gently clear that only au­tho­rized brand sell­ers will be al­lowed,” said Sharma.

Ac­cord­ing to Sharma, even as the plat­form con­tin­ues to delist fraud­u­lent mer­chants, it does not plan to re­voke cash­back of­fers.

Paytm cur­rently has 12 mil­lion mer­chants, and over 300 mil­lion cus­tomers. It con­tin­ues to spend most of its cash in ac­quir­ing new mer­chants and cus­tomers.

“We don’t want to be prof­itable till we have ac­quired 500 mil­lion cus­tomers and 45-50 mil­lion mer­chants,” he said

The fraud at Paytm Mall comes at a time when the e-com­merce com­pany has been strug­gling to make its mark in a mar­ket dom­i­nated by Ama­zon and Wal­martFlip­kart, de­spite be­ing one of the fastest in­ter­net com­pa­nies in In­dia to reach $1 bil­lion in val­u­a­tion. Ac­cord­ing to For­rester Re­search, Paytm Mall’s mar­ket share fell from 5.6% in 2017 to 3% in 2018.

In April, The Eco­nomic Times re­ported that Paytm Mall re­ported loss of ₹1,787.55 crore on a to­tal rev­enue of ₹774.86 crore in 2017-18, cit­ing reg­u­la­tory fil­ings.

The news­pa­per added that the com­pany’s largest backer Alibaba was un­com­fort­able to pump in more cap­i­tal to sup­port its cash­back based e-com­merce busi­ness model.

BLOOMBERG FILE

Paytm founder Vi­jay Shekhar Sharma.

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