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Dangerous Intersection Of Mobility And Credit

The next iteration of virtual currencies like Farm Cash could do real-world damage to your wallet.

There's a 2011 version of the birthday cakes, mugs of beer, and other gifts Facebook used to let us "buy" for our friends. Since July 1, Facebook has required all game developers that receive payments through the site to use Facebook Credits for the transactions. When developers go to convert Credits into cash, Facebook gets a cool 20% cut. Recently, the company opened up Credits, allowing users to purchase items, such as the Batman film from Warner Bros. and tickets to concerts. American Express has partnered with Facebook and created a new app, with the innocent-sounding name "Link, Like, Love," that ties a person's AmEx card with his Facebook account -- the better to purchase daily deals like those developed by Groupon. People can also buy Credits directly for 10 cents a pop via PayPal, credit cards, and other methods.

All sounds like good clean fun, right? So is playing with firecrackers, until someone loses a finger.

The explosion of Facebook use has come in tandem with the explosion of smartphones. Facebook is the No. 1 most used app on smartphones and tablets, so it's no surprise that the company is looking to the future and working to position itself for when virtual money takes off. With Facebook Wallet, you'll be able to link your credit cards with Facebook and use your Credits to buy goods online and in real life by swiping your phone in front of a near field communication (NFC) sensor at the local Starbucks.

Not to be outdone, this week Google announced its Google Wallet application, where you can link your Citibank MasterCard (Visa and AmEx are signing on too) and make payments using the NFC sensor on your phone. While NFC-enabled phones are just starting to make their way to U.S. consumers' pockets, countries such as China and Japan have pioneered the use of mobile phones as payment devices.

Our future most likely won't contain credit card terminals, or even credit cards at all. Your mobile phone will be all that you need to purchase goods around town. And they may be all attackers need to drain your bank account.

While mobile malware has skyrocketed in 2011, attackers still expend very little effort here compared with the amount of time and money spent on conventional phishing, spam, and malware. Most mobile phones and tablets are targeted by attackers looking to use exploits like SMS toll fraud to extract money. It's penny-ante stuff. But if digital wallets grow in popularity, as Google and others expect them to (I think they will soar in 2012), attackers will have a whole new reason to attack your phone.

There are other concerns, too, as we start to virtualize the way we pay for goods and services. For example, if Facebook adds the ability to transfer Credits among users, which was speculated as something under development in 2010, it will do three things practically overnight: create the largest money laundering network in the world since PayPal; become the largest bank in the world; and establish itself as the largest credit card processor. It makes sense -- credit card companies and banks make a comfortable living from the fees they charge for transferring money and processing purchases, and it looks as thought Facebook is already well along in a similar business model.

The intersection of virtual currency and mobile devices is coming, and who knows where the road will lead. What is certain is that there will be potholes, hijackers, and thieves along the way waiting to attack. I'll be tracking hot spots in the InformationWeek Mobile Security Tech Center and suggesting ways to keep your bank account intact, even if you do carry it around on your phone.

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