How Flipkart, Uber and others are tackling Fraud

Thousands of sellers, drivers and restaurants routinely find new ways to exploit the various incentives these ...  Something was amiss about the Lakme Eyeconic eyeliners Satinder Singh bought from Flipkart for his wife. Three orders over a few months, handled by three different sellers in three different cities, and each time something about the product's packaging bothered Singh. He sent the packs to Hindustan Unilever Ltd, Lakme's parent company, for testing. Turns out that he was right. HUL confirmed the cosmetics were fake.
As India's e-commerce economy barrels ahead, one of the biggest challenges for customer-facing technology companies like Flipkart, Foodpanda and Uber is to contain the creeping instances of graft that tear into their businesses and reputations, with social media as an unwitting accomplice.


Thousands of sellers, drivers and restaurants routinely find new ways to exploit the various incentives these tech-driven companies offer to lure both customers and partners—buying their own products, raising the prices of dishes, booking their own cabs, or selling counterfeits.
Companies warn or debar offenders on detecting fraud, typically on receiving a complaint or if their algorithms flag suspicious behaviour from a particular device, phone number, email address or locality. Flipkart immediately removed all three merchants from its online marketplace after Singh and HUL complained.
"We immediately bar such sellers and have established a mystery shopping team to identify fakes," said Manish Maheshwari, vice president and head of the seller ecosystem at Flipkart. "For branded goods such as electronics, we now allow only authorized dealers to sell." To prevent pricing irregularities by vendors, Flipkart uses algorithms to detect if a product's price is too high or low based on the original rate entered in its database.
Customers are not satisfied that e-commerce companies are making enough efforts. "Counterfeit cosmetics are far more harmful than fake electronics or clothes," said Singh, a biotechnologist. "A fake kajal (eyeliner) containing metal impurities may damage vision temporarily or permanently, which no platform can refund." Singh refused to accept refunds offered by Flipkart and HUL.


Gaming the system to make an extra buck becomes easier as e-commerce firms pour their millions of funds raised into cashbacks, incentives and discounts. "We have seen a few cases where merchants bought their own products and applied a coupon for discounts," said Sanjay Sethi, chief executive of online marketplace Shopclues. "This way they made a profit and did not actually sell the product. This was caught out by the system based on the seller address and shipping address being in the same locality."
Also consider the case of taxi aggregators, who are using technology to detect misuse both by their drivers and customers. Take a ride on an Ola or Uber taxi and you will likely find several drivers having two handsets. Many drivers ply for both firms, so one phone will have Uber's mobile application for drivers and the other, Ola's. After a few trips, some drivers, ET found, book and accept rides in their own cabs cross using the two apps so they can complete a minimum number of trips that will make them eligible for daily incentives.
"If the company finds out about one such recurring incident, some ask other driver friends to book trips for them and they do it vice-versa for them," said a driver for one of these cab aggregators, speaking on condition of anonymity for obvious reasons of being exposed.
The number of dishonest vendors ranges from as low as 2% for online retailers to as high as 8% in the case of taxi aggregators and restaurants, as per industry estimates. Payment gateway PayU India estimates that 4-5% of all ecommerce transactions in India are fraudulent. E-commerce in India is expected to gross over Rs 66,000 crore in the current financial year ending March 31, 2016, retail advisory firm Technopak estimated.

"To overcome (fraud), we have introduced a unique feature called 'Buyer protection' fund under which the consumer's payment stays protected till the time he or she gets the delivery," said Gurjodh Pal Singh, senior vice president, business at PayUmoney.
E-commerce companies are launching awareness campaigns to educate as well as warn their external partners. Flipkart sends mails to its sellers citing the company's efforts with law enforcement against the sale of counterfeits on its platform. Paytm has a cyber-cell dedicated to identifying and preventing fraudulent activities.