New Android smartphones are being sold in developing markets with pre-installed malware, creating an international ad fraud ecosystem and leading to unauthorised charges for owners.

According to Upstream, many inexpensive smartphones are sold with malware which collects the personal information of users, depletes their mobile data allowance and triggers fraudulent subscription charges to their pre-paid credit.

“Our Secure-D platform has uncovered that a number of cheap smartphones for sale in developing markets, such as Brazil, Egypt, Myanmar and South Africa are sold with a digital ad fraud malware pre-installed, before the user has even turned the phone on for the first time,” said Guy Krief, CEO of Upstream. “It communicates with, and sends unauthorised personal user data to a server in Asia, depleting their data allowance and signing them up to premium subscription services without their consent.”

Smartphone penetration in developing markets is rapidly increasing, and expected to reach 62 per cent by 2020. As a result, broadband connections are also increasing, expected to rise to 88 per cent in Brazil by 2020, for example. However, the cost of data in emerging markets remains expensive, relative to local income levels, and with high levels of the population unbanked, pre-paid mobile subscriptions and carrier billing remain popular when it comes to paying for digital services.

“This malware is targeting consumers who are often getting online for the first time via their mobile device and have no other way to access the interneet,” said Krief. “In emerging markets, where online clicks can trigger a purchase and charges to airtime credit, such online advertising fraud directly impacts the end consumer.

“These users are immediately falling victim to fraudulent activity, which is using their mobile data allowance and taking money from their air time credit. In one month, we observed over 1.3m fraudulent attempts to purchase a single digital premium service in Brazil alone, the first of the markets where we identified this issue.”