Hackers on Thursday showed how to turn the latest model Square mobile payments readers into crime tools.

Independent security researchers and self-described hackers Alexandrea Mellen and John Moore were at the Black Hat computer security conference in Las Vegas to demonstrate hacks targeting Square software or the dongle that plugs into audio jacks to read credit card magnetic strips.

"We converted a Square Reader into a credit card skimmer in under 10 minutes," Mellen told AFP.

"Any layman could do it."

She said the hardware hack can be done with simple tools including a screwdriver, wire and soldering iron, and that most of the time involved was spent carefully popping open the reader that Square provides to users of its mobile payments application.

Inside the reader a wire is soldered between two points to bypass an encryption chip.

After that, unscrambled information from swiped credit cards can be collected, essentially stolen, to be sold on a black market or abused in other ways, according to Mellen.

- Playback attack -

On the software side, Moore provided details about a mobile application that enables a "playback attack" that lets merchants charge customs for bogus transactions in the weeks or months after legitimate purchases are consumated.

"We find this troubling because unless you are closely watching your credit card statements, you might not notice," said Moore, a recent Boston University graduate on his way to a job with Internet giant Google.

Moore said that he and Mellen, also a recent graduate of Boston University, targeted the Square Reader because the company headed by Twitter co-founder Jack Dorsey is a leader in a booming trend of using smartphones for real-world financial transactions.
"Square, given its size and a bug bounty program, is no easy target," Moore said.

"We suspect the vulnerabilities we found in Square might easily apply to other mobile point-of-sale service providers."

An array of major Internet firms offer cash rewards, or bounties, for software bugs that can be exploited by hackers.

New hardware and software is quickly being fielded in the competitive mobile payments market, with pressure on to keep plug-ins compact and inexpensive, according to Moore.

Mobile payments software needs to be compatible with a variety of mobile phones, which can't be secured as easily since they are used for many more purposes than making purchases.

Moore referred to the combination of factors as "a recipe for disaster."

The hackers said they made their findings available to San Francisco-based Square but are not convinced fixes are planned.

Moore said Square told him they were watching for the kinds of bogus transactions that could be generated by "playback" hacks.

"They have the information to see the swipe of the credit card was taken weeks ago," Moore said.

"They have chosen to monitor the behavior instead of preventing it."