The fraud was detected through a tool that the company developed in partnership with global professional services firm EY.
Paytm Mall on Tuesday said it has been hit by a cashback fraud which could be in the range of Rs 5-10 crore.
The fraud was detected through a tool that the company developed in partnership with global professional services firm EY (formerly Ernst and Young), said a Paytm Mall spokesperson.
He said Paytm went for a deeper audit after it found that some small sellers were getting large percentage of the cashbacks offered at Paytm Mall.
The audit reportedly revealed that a number of employees were colluding with junior employees to earn the cashbacks.
"The fraud is in the range of Rs. 5-10 crore," the spokesperson told IANS.
A brainchild of Paytm Founder and CEO Vijay Shekhar Sharma, the e-commerce platfom's losses have mounted and in the financial year 2018, the company posted a loss of nearly Rs. 1,800 crore on revenue of Rs. 774 crore.
According to Forrester Research, the market share of Paytm Mall almost halved in 2018 -- to 3 per cent from 5.6 per cent in 2017.
"Our partnership with E&Y will help benchmark with global best practices as we build a technology driven fraud prevention system to scale our operations," Srinivas Mothey, Senior Vice President - Paytm Mall, said in a statement on Monday.
"Our teams continue to work closely with E&Y to share our learnings and insights. We are committed to building a trusted commerce platform and will take strict action wherever needed," Mothey added.
Over the past few years, Paytm has been bleeding massively in online retail business and there is no respite in sight.
Apart from admin, finance and other support functions, the company also has a business operations team which works closely with partnered merchants to plan and execute cashback offers and promotions leaving a scope for collusion.
"The EY partnership will also undertake audit and fraud prevention using both human and Artificial Intelligence (AI)," said Paytm Mall.
Paytm Mall is far behind the top two e-commerce players in terms of market share. They have a single-digit share against the top leaders which are commanding over 30 per cent market share.
Paytm Mall has so far managed to raise over $650 million from Alibaba, SoftBank and SAIF Partners.
Disclosure: Paytm's parent company One97 is an investor in Gadgets 360.
Get your daily dose of tech news, reviews, and insights, in under 80 characters on Gadgets 360 Turbo. Connect with fellow tech lovers on our Forum. Follow us on X, Facebook, WhatsApp, Threads and Google News for instant updates. Catch all the action on our YouTube channel.