TMICY Trend Micro Inc (PK)

Mobile money never sleeps, or so the buzz around wireless payments at this year's annual industry gathering here would suggest.

Recent deals, such as those between EverythingEverywhere and Barclaycard in the U.K. and Telefonica SA's (TEF) deal with Mastercard in Latin America, underscore the increasing importance that a new generation of wireless financial services have for operators, their financial partners, and for consumers. The trend is one of the major themes at Mobile World Congress, with a string of networking sessions devoted entirely to the topic.

However, security dangers, including software viruses and the threat of hacking, lurk to trap the unwary, amid warnings of an expected increase in virus infections as smartphones and tablet computers with high-speed wireless connections become the device of choice for consumers.

In the last quarter of 2010, more smartphones were sold globally than personal computers for the first time. However, industry estimates indicate that while over 70% of PCs have some sort of protection against viruses or malware--software designed to provide secret access to a device--just a small minority of smartphones are similarly shielded.

"Wave and pay" at certain shops in countries with contactless payment cards like Mastercard's PayPass and Visa's WavePay, which contain an embedded near-field communication, or NFC, microchip that communicates with a reader to process payment transactions, aren't the main area of concern, experts say. Such mobile wallet capabilities are embedded on the chip, which is secure unless the phone is stolen.

But sophisticated cellphones that are more like mobile computers are increasingly used for transactions like online shopping, airtime top-ups and bill payments, according to a recent Juniper Research report. It is these that are vulnerable to attack, much like any PC. The security issue also affects mass-market phones; in developing countries still outside the fast-growing smartphone trend, mobile money payments face significant security challenges.

A recent survey by anti-virus software AVG International (AVGL) shows that only 29% of smartphone users have even considered downloading anti-virus protection. This, despite the fact that cellphone viruses, often embedded as Trojan software with other applications, aren't new; they have been detected since at least 2004 when the Cabir virus first hit.

Anti-virus companies with strong sales in the PC universe, like AVG or rival Trend Micro Inc. (TMICY), are moving to fill that potentially lucrative niche, with a focus on protecting sensitive financial data--the No. 1 target for developers of malicious software.

Tony Anscombe, an AVG vice-president, said mobile infections are on the rise as virus developers move their efforts from the PC to smartphones, mostly through small-scale thefts that are harder to detect by the user.

"People are smart," Anscombe said. "They know that if they just take a small amount of money, then it's much harder to detect, and they can keep on doing it."

The AVG survey showed that 6% of respondents said that mobile applications had transmitted confidential payment information such as credit card details without the users' knowledge. And only 11% were aware that this is possible in a smartphone.

Gemini is a recent example of such infection, a Trojan-style virus that collects confidential details, which emerged in December in Chinese cellphones running Google Inc.'s (GOOG) popular Android software, hidden on previously downloaded applications.

Android's Market Place already offers applications from anti-virus companies that run software to detect and cleanse infections on smartphones. However, due to the tighter control its exerts over its devices, Apple Inc.'s (AAPL) App Store lacks a similar range of offerings.

Meanwhile, in regions like Africa, Southeast Asia and Latin America, mobile money transactions have been booming for years due to the lack of traditional banking services in many areas. According to Juniper estimates, international mobile money transfers will more than double by 2013, driven by migrant workers from those regions sending remittances to families back home.

Most of such transactions are currently conducted via short-message-service, or SMS, which is relatively easy to hack. Encrypting SMS is one possible solution to the threat, and Arizona-based CellTrust presented software in Barcelona that targets this area.

Still, Pedro Silva, an engineer with Airwide Solutions, a U.K.-based provider of network equipment, said that encryption fixes have been proposed in the past and rejected by telecom operators due to their complexity and the need to be compatible with multiple devices and networks.

"When we have looked into this in the past and told the telcos how difficult it is to get what they intended, they just threw their hands up in the air," Silva said.

-By David Roman, Dow Jones Newswires, +34 628 278718; david.roman@dowjones.com

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