Shopkick, a startup trying to pair location and shopping, has a new iPhone application out now that lets users earn Facebook Credits by walking inside retail businesses and scanning items.

Users obtain Kickbucks, the app’s virtual currency, when their phone receives a signal from a Shopkick in-store transmitter or scans a bar code. For example, you get 70 Kickbucks just for walking inside Best Buy. The process means check-ins can’t be faked like on other popular GPS-based location apps. The exchange rate is 25 Kickbucks to 1 Credit.

Shopkick has partnered with Simon Property Group, owners of 100 shopping malls, plus many Best Buy, Sports Authority and American Eagle stores to roll out their walk-in promotion. Shopkick’s hardware-to-mobile walk-in system was designed to work well in malls where a high density of businesses and low wireless signal can cause problems for GPS-based services. In the future, the app will reward users for walking to certain departments of retail locations. Users can also visit convenience stores or pharmacies and earn 25 Kickbucks for scanning bar codes of items including Kraft Philadelphia Cream Cheese and Tide detergent products.

Shopkick, which has raised $20 million in rounds led by Greylock Partners and Kleiner Perkins Caufiled & Byers, is giving away Kickbucks to users even if they don’t go inside — simply using the app to view a profile of a business that you’re within 500 feet of will get you the currency. This helps engage users even if they don’t visit stores.

The app runs smooth and is fun to use, letting you level up, earn badges, a get your photo on the “wall” of a business’ profile. Facebook is used for login, but sharing and invite features on the app all route through email. When Kickbucks are redeemed for Facebook Credits through the app, the Credits instantly appear in a user’s Facebook account. One confusing point is the option to donates to “causes” — this isn’t related to the app developer of the same name, this is for Causeworld, a mobile app by the makers of Shopkick which lets users check-in to stores to earn donations.

By ensuring customers are actually inside stores and physically handling products, Shopkick offers businesses something worth incentivizing with discounts, gift certificates, and Kickbucks redeemable for Facebook Credits, donations to charity, DVDs and more. Shopkicks prevents gaming of the system by only allowing one Shopkick account per phone number and by limiting how often Kickbucks can be earned by walking into a certain location or chain, or scanning a specific item. Shopkick’s combination of security for businesses with quality incentives and fun for users could make it the killer location based loyalty app, all without having to tell people where you are.