An SMS OTP is a security measure in which a code consisting of numbers or letters is sent to the user’s phone number to confirm their identity. This method is used to protect user’s private information and data. SMS OTP is among the most commonly adopted authentication methods to replace users’ usual username and password login access. It is widely used among big companies such as Paypal, Meta, and Amazon.
As part of the SMS OTP verification process, businesses send a one-time password (OTP) via SMS text to the user’s phone. The user enters this OTP on the device used for authentication within a specific time frame. This approach helps protect against phishing and malicious attacks. Combine SMS OTP with other techniques, such as biometrics or two-factor authentication, for added security. This article will help us understand more about SMS OTP, its definition, how it works, and its importance for businesses.
What does SMS OTP mean?
An SMS one-time password (OTP) is a secure way to grant access to an application or complete a transaction. Unlike user-generated passwords, they are only valid for a single transaction and expire within minutes.
The OTP service allows your company to send customers one-time passwords through email, text, or voice message. Your company may create an OTP automatically whenever a customer requests to log in or do a transaction. These OTPs consist of a randomly generated string of alphanumeric characters, making them difficult to break or hack.
Businesses can enhance the security of their website, mobile app, and third-party apps by utilizing the OTP SMS API. With automated analytics reports, you can keep track of the OTP delivery status, including successful, unsuccessful, and reattempted attempts. These OTP services can help safeguard your business transactions.
How does SMS OTP work?
An SMS one-time password number is a virtual, cloud-hosted phone number with ten digits that allows you to send text messages to users. To help your customers quickly identify your messages, you can use a sender ID from a trustworthy SMS verification number provider that reflects your brand’s name instead of the 10-digit number.
The following describes how the SMS OTP function and work:
- The user uses the “verify” button on a website or app, which could also be labeled as “confirm with OTP” or “login with OTP,” depending on the authentication process. After that, your backend system generates the OTP.
- The OTP SMS service provider verifies the customer by sending an SMS containing the generated OTP to their registered mobile number.
- As soon as your customer enters the unique OTP sent by Exotel on your app or website, their number will be immediately validated and their identity verified.
An OTP is a random number or string of characters automatically generated and cannot be predicted in advance. Moreover, OTPs have a limited lifespan and can typically only be used for a few minutes.
Multiple methods exist to send OTPs, including email and voicemail. However, email is considered less secure, and voicemail involves stating the PIN aloud. The most prevalent method is sending OTPs through mobile messaging, which involves sending an SMS text to the customer’s cell phone.
How does SMS OTP differ from SMS 2FA?
There are several differences between an SMS OTP and SMS 2FA. An SMS OTP is a type of single-factor authentication traditionally used as an alternative security process to using passwords or verifying the identity of a user before they are given access. SMS one-time password is typically sent to the user’s registered mobile number.
SMS 2FA (2-Factor Authentication) is an upgraded security layer that requires the user to enter a one-time password and another form of authentication, such as biometrics or answering a few security questions. This strengthened method for authentication processes helps protect against malicious access attempts and provides additional layers of protection in case a hacker guessed or intercepted the OTP.
Businesses often use SMS one-time passwords to verify transactions and user identity. In contrast, SMS 2FA is used more frequently to secure access to websites, applications, and other online accounts.
What is the Main Purpose of SMS OTP?
The main purpose of SMS OTP is for added security when logging into or verifying an account. It can increase the security of an online transaction, account login, or website access. The randomly generated code acts as a second layer of defense against potential threats such as identity theft and data breaches.
Companies use websites, applications, and software as internet platforms that can be accessed through a specific URL. However, using a password alone is not enough to protect your account. To safeguard your business transactions, it is recommended to use an OTP SMS service that can prevent password-based attacks, securely send information, and verify your business transactions.
Is OTP the same as SMS?
No. OTP stands for One-Time Password, a randomly generated code used as an additional layer of security. SMS stands for Short Message Service, the technology used to send text messages from one device to another. The two terms are not interchangeable; while SMS can transmit an OTP, they are different technologies and serve different purposes. Read What is SMS to understand more about this marketing method.
What is the Importance of SMS OTP in Business?
SMS OTPs are essential to any organization’s security protocols and can help protect customers from fraud, identity theft, and data breaches. By implementing two-factor authentication measures such as SMS OTPs, businesses can ensure that only authorized users can access their systems and networks.
The OTP SMS service also allows businesses to verify customer identity quickly, easily, and securely. It helps ensure that only genuine customers can access online accounts or make online purchases, reducing transaction fraud risk.
Verizon’s “Data Breach Investigation Report” states that every year there is a significant increase in cyberattacks, data breaches, password thefts, and other crimes. The report claims that it is highly unlikely for a password to be stolen after compromised encryption. However, in over 81% of hacking incidents and data breaches, weak or stolen passwords played a role. The report also reveals 6300 cyber incidents, 1300 data breaches, and over 50 organizations affected across 95 countries.
SMS OTP can protect businesses through the following:
- Prevent attacks – It is easy for cybercriminals to figure out passwords created by users. They commonly use techniques like dictionary attacks, brute force attacks, and password sniffing. One-Time Password (OTP) services prohibit the use of mathematical techniques to crack passwords.
- Limit Password Validity – Using the same password for multiple transactions can harm the data security of businesses and consumers. To increase security, one-time passwords, also called transaction SMS, can be used since they can only be used once per transaction.
- Verify Transactions – Businesses use this service to secure digital transactions such as payments, account activation, password resets, and eCommerce purchases. OTPs are used by businesses due to their highly secure feature, which ensures the safety of customer information and digital transactions.
- Overcome Limitations – Customers use static passwords and PINs to make financial transactions and send sensitive information. However, they often fail to create strong passwords that are difficult to guess. It increases vulnerability to targeted security attacks when the same password is used for multiple login sessions or transactions involving sensitive information and finances.
What type of Businesses uses SMS OTP?
Businesses in different sectors with online transactions use SMS one-time passwords.
The OTP SMS service is also used to authenticate customers in other industries. Here are the ways businesses use one-time passwords in their transactions.
- Banking and Finance – Banks use SMS OTPs to authenticate customers during online transactions such as fund transfers, purchases, and withdrawals.
- Retail – Retailers typically use one-time passwords for eCommerce transactions. It helps them verify the identity of their customers and protect their financial information when making online payments or purchases.
- Healthcare – Hospitals and medical centers use one-time passwords to protect patient data when accessing records or updating information.
- Government – Governments worldwide use OTPs to authenticate citizens during online transactions such as passport renewals and tax payments. It helps secure sensitive information and reduce the risk of fraud, identity theft, and other cybercrime.
- Telecommunications – Telecommunications companies use OTPs to authenticate customers when signing up for services, making payments, and resetting passwords.
- Education – Universities and schools use one-time passwords to secure student accounts and protect them from cyber threats, malware, phishing attacks, and other malicious activities.
- Airlines and Hotels – Airline companies and hotels use one-time passwords to secure customer transactions and prevent unauthorized access to their accounts.
How is SMS OTP generated?
A unique code is sent to the user’s phone via an SMS message whenever a transaction needs to be verified. The code is typically generated by a random number generator (RNG) algorithm. The user can enter the code to authenticate their transaction once the code is received. It is important to note that each code is valid for a certain amount of time and will expire after a set period.
The number of digits generated in SMS OTPs can vary from four to eight digits, depending on the service provider. They are generally valid for up to two minutes and will expire automatically afterward. OTPs are generated by businesses as an extra layer of security to ensure that only authorized users have access to their accounts or data.
What is the cost of SMS OTP verification?
SMS OTP verification costs range from a few cents to several dollars. The cost depends on the service provider, the number of messages sent, and other factors such as location and type of message. Businesses that send out high volumes of messages may be able to negotiate lower costs with their service provider.
How long does it take to receive an SMS OTP?
The time to receive an SMS OTP varies depending on the service provider and the user’s location. Generally, OTPs are sent within a few seconds of the request being made. However, in some cases, it may take up to several minutes for the message to be delivered due to network or server delays. In such cases, when the SMS OTP is not received during the allowed timeframe, the user cannot access their account and should choose a different login method.
How long does SMS OTP last?
SMS OTPs are usually valid for a few minutes, typically up to two minutes. After this period, the code will expire, and the user must request a new OTP to authenticate their transaction. It prevents unauthorized access to accounts or data.
How secure are SMS OTPs?
SMS OTPs are generally more secure than other authentication methods, such as username and password combinations. Since the code is generated randomly and sent to the user’s phone via an encrypted message, it is difficult for hackers to intercept or guess the code. However, there have been reports of SMS OTPs being intercepted by hackers through a process called “SIM swapping.” Therefore, ensuring that the mobile phone used for authentication is secure and not vulnerable to attacks is essential.
What can hackers do with OTP?
Hackers can intercept an SMS OTP and use it to gain access to an account, such as a banking or email account. They can also use the code to bypass security measures and gain access to sensitive data. Therefore, businesses need to ensure that their SMS OTPs are secure and cannot be intercepted by hackers.
What are the benefits of SMS OTP?
Using SMS one-time passwords has several benefits for businesses and users. Some of these pros include the following.
- Widespread Customer Familiarity – Using an OTP is a widespread practice for various tasks, such as activating a bank card or resetting a password. Since there are almost twice as many mobile devices as people worldwide, almost everyone who requires an OTP can use their cell phone to receive it.
- Ensures High Reliability – Although One-Time Passwords sent through SMS are only partially reliable, most are delivered promptly within a few minutes. In case of a failed delivery, the customer can request another OTP.
- OTPs Satisfy a Wide Number of Scenarios – OTP (One-Time Passwords) have several uses and are commonly used in the financial industry. However, they are also becoming more popular on various websites and applications. OTPs are used to authenticate a user’s identity or access rights, which adds an extra layer of security to secure processes already. It is based on the “multiple factors” of TFA and SCA.
- Easy to Integrate and Scale – One-time passcodes sent via SMS are convenient for businesses to integrate and adapt to their security needs. Security teams can efficiently distribute them to employees, and are difficult for hackers to memorize, access, or reuse due to their cryptic nature.
- Enhance Customer Experience – Implementing one-time passwords (OTPs) can improve user experience and save a business on operational costs. Research shows that customers trust secure brands, with 73% of consumers reporting a high level of trust when their information is specific. OTPs are user-friendly, as many people know how to use their phones to receive them.
What are the risks and limitations of SMS OTP?
SMS OTP is a frequently used method for user authentication, but it may not be as secure as we believe. In addition to security concerns, there are other factors to consider when selecting an authentication method. The following outlines the typical risks and limitations associated with SMS OTP verification.
- SIM Swap Security Risk – Beware that hackers might apply SIM swapping to gain entry to personal accounts. This technique involves the hacker pretending to have lost their SIM card and activating a new one with the same number using the victim’s mobile service provider. As a result, the hacker can get around 2FA by using the phone number they acquired. If the victim’s accounts have SMS verification, the hacker could intercept the messages to change passwords, access sensitive information, or even steal money from online banking accounts.
- SS7 Technical Flaw – The SS7 protocol is a vital standard used in mobile communications to enable SMS, calls, number translation, and call forwarding services. However, its design flaws can be exploited by hackers to intercept calls, SMS, and one-time passwords. It is because the security vulnerabilities in the SS7 protocol present in cellular networks can be taken advantage of.
- Social Engineering Risks – Research shows that individuals are often the weakest link in SMS security, and hackers are becoming increasingly proficient at using phishing techniques to obtain OTPs. “Smishing attacks,” or SMS-based scams, increased by 328% in 2020. To protect against OTP theft, businesses should educate users on smishing and security measures for their codes. Another possible solution is implementing a verification method that reduces hackers’ ability to steal information.
- SMS OTP Can Be Quite Expensive – Although SMS verification is user-friendly, it can become expensive for businesses. Companies are charged for each SMS message they send to their users resulting in high monthly expenses. Businesses pay for each SMS OTP message they send, but sometimes these messages are not delivered, leading to wasted costs. The cost of SMS messages varies based on the provider and the number of messages sent. Nevertheless, weak SMS authentication can subject a company to catastrophic attacks and damage its reputation.
- Friction in User Experience – Using SMS OTPs for logging into online applications and services is common among more than 60% of users worldwide. However, relying on SMS verification can sometimes lead to poor user experience as it is not always reliable and can be delayed or not delivered at all. It causes inconvenience for users who can log in once they receive the SMS OTP. Sometimes, this can even drive users away from using the service.
Can SMS OTP be used in SMS marketing?
Yes. SMS OTP can be used in SMS marketing campaigns to authenticate users and ensure their data remains safe. This type of authentication can help reduce fraud and provide additional security for businesses. Additionally, using SMS OTP for marketing allows companies to track customer engagement with their campaigns easily. It is beneficial for businesses to measure the success of their campaigns and target customers who interact with particular messages. However, companies must ensure compliance with local data protection regulations when using SMS OTP in marketing campaigns. Discover what is SMS marketing, Guide and Benefits to know how to use it for your business.
Is SMS OTP legal?
Yes. SMS OTP is a legal means of authentication in most countries. However, businesses should always comply with local regulations when using SMS OTP for authentication purposes. Companies should also adhere to other applicable laws and regulations, such as consumer data privacy and GDPR compliance. Companies must also protect the security of customer data by keeping their authentication processes secure and implementing additional security measures. Furthermore, organizations should note that SMS OTP is subject to the terms and conditions of their service provider and be aware of any extra fees or charges associated with using this type of authentication.
What is an alternative for SMS OTP verification?
An alternative for SMS OTP verification is two-factor authentication (2FA). 2FA is an authentication process that requires the user to provide two pieces of evidence to verify their identity. It typically involves a combination of something they know (e.g., password) and something they have (e.g., phone number or physical token). Two-factor authentication can be more secure than SMS OTP because it requires the user to provide two pieces of evidence, thus making it more difficult for hackers to access the system. Additionally, some businesses may opt for biometric verification methods such as facial recognition or fingerprint scanning. These types of authentication can be more secure and convenient than SMS OTP and are becoming increasingly popular among businesses.