Megha is required to make an urgent payment for a mobile bill as her husband was traveling. She tried to make payments using her credit card online for the first time. She wasn’t aware of any additional password required for using the credit card online. She was asked to register her card for an additional password first. During registration, she was sent a one time password (OTP) on her registered mobile number. During the set up of additional password, she was required to use the OTP. After successfully registering for additional password for credit card, she made an online mobile bill payment with her credit card. She was surprised with the OTP and tried looking for more information about that.

A one-time password (OTP) is a password that is valid for a one time transaction or log in only. It is generated by an OTP device or sent to registered mobile number, email address. It is normally used as an additional measure of security for a critical transaction.

Benefits o f using an OTP:

1.    Covering limitations of conventional password: It covers up the limitations of conventional password, which is prone to hacker’s attacks. This makes a log in and transaction secure as because the hacker would be unable to commit a fraud with only the conventional password.
2.    Impossible to guess password: An OTP is generated by using mathematical or time based methods. Complex calculation is used to generate an OTP hence making it difficult for other people to guess.  
3.    Secure delivery of password: OTP is normally delivered via SMS on a registered mobile phone. It is alternatively delivered to a registered email also.  Of late, an OTP can be generated using a security token. A security token is associated with the account and a code generated by the token is valid for the associated account only.
4.    One time use: The password is only valid for only for one time usage which makes fraudulent or unauthorized use impossible. An OTP becomes invalid in few hours from its issue.

Here is list of transactions which normally requires OTP

1.    Log in to Bank account
2.    Log in to share trading account
3.    Buy or sell of shares
4.    Registering a new payee for bank account
5.    Fund transfer
6.    Credit card payment
7.    Change in mobile number or address
8.    Debit card use
9.    Ordering cheque book

Hence, make sure if your bank provides for an OTP service, you should subscribe for it. It is always beneficial.

Ketul H Shah is a Chartered Accountant and an MBA. He has specialized in banking, finance and insurance. He is passionate about consumer rights and actively offers professional advice on consumer-related matters.

Ketul maintains a blog on www.askketul.com
   
 

e-mail: Ketul Shah

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