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One-time password (OTP)

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One-Time Password (OTP)

A One-Time Password (OTP) is a unique, time-sensitive code used to verify a user's identity during digital transactions or login attempts. Unlike traditional passwords, OTPs are valid for only one session or transaction.

How does an OTP work?

OTPs are typically generated by an authentication server and sent to the user via SMS, email, or a mobile app. Once received, the user enters the code to confirm their identity. The code expires after a short period or after a single use.

Why are OTPs important?

While OTPs are not recommended for standalone use, when used as a component of multi-factor authentication (MFA), OTPs add an extra layer of security beyond usernames and passwords. They can help prevent unauthorized access, especially in online banking, e-commerce, and enterprise systems. Top questions about OTPs:
  • What is my One-Time Password? It’s a temporary code sent to you via SMS, email, or app to verify your identity.
  • OTP text message This refers to receiving your OTP via SMS. It’s one of the most common delivery methods.
  • How do I find my OTP code? Check your SMS inbox, email, or authentication app. The code is sent during login or transaction.
  • Is an OTP a text message? Often, yes. OTPs are frequently delivered via text messages, but they can also be sent via email or generated by apps.
  • How do you find an OTP code? It’s sent to the contact method linked to your account—usually your phone or email.

Common use cases for OTPs:

  • Logging into secure accounts
  • Authorizing online payments
  • Verifying identity during password resets
  • Confirming sensitive account changes

OTP fraud examples

One-time password authentication can leave customers vulnerable to fraud threats. These could include:

  • Man-in-the-middle attacks: A hacker intercepts and relays communication between two parties without their knowledge, much like eavesdropping.
  • SIM-swap fraud: A fraudster gets hold of a customer’s personal credentials, calls a mobile network operator (MNO) and, posing as the customer, requests a SIM swap. Once the new SIM card is active, all SMS OTPs are delivered to the fraudster’s device, allowing them to verify transactions.
  • Social engineering attacks: Like phishing, vishing, and smishing attacks. These occur when a hacker pretends to be an authority figure like a bank employee, and manipulates a customer into sharing their credentials or an OTP.

How SMS OTP verification works (example flow)

1.Customer initiates an action

– e.g., logging in, making a high-risk payment, or changing profile information.

2.System sends an SMS OTP

– A unique, time-limited code is generated and sent to the customer’s registered mobile number.

3.Customer enters the OTP

– The code is typed into the app or web interface.

4.Verification

– If the OTP matches, the action is approved; if not, the user must retry or request a new code.

5.Authentication completed

– Access is granted or the transaction proceeds.


Limitations of SMS OTP verification

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  • Vulnerable to SIM-swap and device-takeover attacks
  • Relies on mobile network delivery, which can be delayed or disrupted
  • Increasingly targeted by OTP bots and social-engineering scams

Modern authentication alternatives to OTPs

Many financial institutions are moving away from outdated OTP authentication measures to modern, more secure solutions such as multi-factor authentication, risk-based authentication and Context Aware™ Authentication to protect their customers from fraud.

Additional resources:


Keywords:

One-time password (OTP) | Multi-factor authentication (MFA) | SIM-swap fraud
2024-05-20 14:04 O