Paytm Mall – the e-commerce unit of Paytm – has hired the global consulting and auditing major Ernst & Young (EY) to conduct forensic audit into alleged cashback scam in the company. The scam that was unearthed earlier this year has largely put company’s junior to mid-level employees in the eye of suspicion. If reports are to be believed, EY’s forensic audit has already led to suspension of 20-25 employees from the company.
Paytm Mall’s junior to mid-level employees embezzled undisclosed amount after colliding with several third party vendors to create fake cashback orders, reports claim. The exact amount of fraud or scam is still not known but forensic audit is conventionally conducted when the scam/fraud is more than $2 Mn.
EY is currently in the middle of creating a ‘technology-driven fraud prevention system’ to ensure that no such fraud takes place in the future. Cutting edge technologies like artificial intelligence (AI) is also been used to develop this prevention system.
The timing of this scam could not have been more ill-timed as Paytm Mall is struggling to sustain itself in the e-commerce market. Despite all its funding muscles and unicorn tag, Vijay Shekhar Sharma’s ambition to turn Paytm Mall into a burgeoning e-commerce player is turning out to be a sour dream. The company has been continuously losing the market share in spite of its extensive and long drawn cashback offers.
According to reports, the Gurugram based e-commerce company held merely 3% market share in 2018; a far cry from nearly 31% market share held by both Flipkart and Amazon during the same period. In the wake of receding market share existing investors Alibaba and SoftBank are shying away from making any further investment into the company. Their reluctance may also have been partly caused by the exit of several senior management executives from the firm.
With two of its largest investors turning cold, Vijay Shekhar Sharma has been forced to look for new investors to ensure that his e-commerce dream remains afloat. The young billionaire has most likely found the refuge in the U.S based e commerce giant Ebay. Reports claim that Ebay is almost closing in to invest $160-170 Mn in the company.
While Ebay’s investment may offer some funding respite, it is unlikely to remove all the dark clouds currently hovering over the company. The uncovering of the cashback scandal, which was quite unexpected, has obviously meant that these dark clouds will continue to linger over Paytm for quite some time.