What is One Time Password and How It Can Help Your Business

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Connecting services with online systems makes businesses and organizations of all sizes more vulnerable to cyber attacks or cybercrime. Your business may be ambushed simply because the attacker sees it just as an easy target, not for any other particular reason. 

If you work in services where customers require a log-in process to access their data, the cybercrime issue should be part of your concern. Account usernames and passwords can be easily stolen within a phishing attack, or in another case, attackers can just easily guess them.

As more and more people use the internet to shop, study, work and socialize, it is no longer sufficient to only rely on your system’s security with complex passwords. Especially for industries like banking and e-commerce, user privacy is highly important. 

Since we are talking about the use of personal information and financial transactions, brands are taking extra measures and precautions to increase security and prevent fraudulent activity. One Time Password OTP is one of the most common methods used to reduce security risk. 

But how exactly does OTP help? Let’s take a closer look.

what is one time password

What is a One Time Password (OTP)?

The definition of a One-Time Password (OTP) system is a mechanism for logging into a network or service with a unique password that can only be used once, as the name suggests. Because of the unique generated number, OTP is more secure than static or user-generated passwords. A one-time password can replace user login information for the authentication process or can be used to add another layer of security.

One Time Password Examples

One Time Password security is a one-time token, generated by microprocessor-based smart cards or pocket-sized key fobs that produce a numeric or alphanumeric code. It is used to authenticate user access to a target system or transaction, with a secret code changes every 30 or 60 seconds.

For some mobile apps such as Google Authenticator, device tokens and PIN are highly dependable to generate a one-time password for two-step verification. OTP security tokens can be implemented using hardware, software, or on-demand. Unlike traditional passwords that stay fixed or expire every 30 to 60 days, a one-time password is used for a single transaction or login session.

Another example of OTP, when you log in to an online shopping application. It usually requires OTP codes to make sure that the user who attempts to log in as an authorized user with the same id that is trying to log in. You won’t be able to log in or even make transactions without an OTP PIN or code.

How do OTP works?

A one-time password (OTP) is sent to the user’s mobile device, who wants to log into their digital accounts. This helps verify its identity and should be used within a certain timeframe. Once the OTP grants access to the account, it automatically expires. 

The password, commonly consisting of a four or six-digit numeric PIN or combination of characters, can only be entered once. This is the reason why it is not as dangerous as a static password that can be used more than one time.

Using a one-time password can not only save you a lot of money and headaches, but it also gives your user peace of mind, knowing that their credentials are secure. If a customer’s account details are compromised, the authorization process will not be completed without sending the correct OTP to his registered mobile account. If a user enters an incorrect password once, he or she can always request a new code up to three times to access the account.

One-time passwords are generated through a random algorithm that creates new random characters each time a new password is requested. The code then acts as a second unique password or factor authentication for each account login and expires in a certain time frame after it’s obtained. This makes one-time passwords ideal for some of the most unique and sensitive activities that occur on the Internet.

Who’s responsible for authenticating OTP?

In the case of a one-time password, there will be a central authority to verify its authenticity. Responsibilities are often delegated to authentication servers, which can be hardware controllers or software tools. The server checks if the code entered by the user on the device is correct before allowing them to log into their account.

Authentication servers typically generate a one-time password based on time, “synchronized” with the OTP code or PIN as well so they leverage the same numeric value to arrive at the same OTP. Another method involves a mathematical algorithm that derives the value of a previously used one-time password. The authentication server also integrates with enterprise directories such as AD/LDAP and features web-based dashboards for easy control and management.

Some service providers also offer apps that make it easier to manage one-time passwords. For example, if the OTP is associated with a device and the person forgets the device at home, they can log into the OTP provider’s web application to request a one-time password sent to their email, for one day only. The same app can also be used to request a new PIN if the previous one is lost or entered incorrectly. Users can easily report broken or missing tokens to administrators via the app.

Benefit of OTP

Safe from Replay Attacks

The biggest advantage that OTPs offer compared to user-generated passwords is that they are secure from replay attacks. Simply put, an adversary who uses trickery to capture a one-time password cannot reapply it, as it is no longer valid for the future login session.

Easy to Use

Most people own cell phones, and SMS functionality is present on every device. SMS makes one-time passwords convenient to use. This is also useful for companies at sending OTPs, as end-users are familiar with their phones and don’t need another device to receive the code. As a result, a one-time password enables companies to not only improve user experience but also reduce operating costs.

Prevent Online Identity Theft

Because one-time passwords become invalid within seconds, hackers won’t be able to use them to retrieve the code and reuse it. OTP is a unique access token that is used once during the authentication period.

Avoid Password Security Issues

One-time password avoids common pitfalls that IT administrators and security managers face with password security. You don’t have to worry about synthetic rules, known bad and weak passwords, sharing credentials, or reusing the same password across multiple accounts and systems. As mentioned above, OTP codes/tokens become invalid within a certain timeframe, which prevents attackers from getting the secret code and reusing it.

Hard to Guess 

OTP codes/tokens are often generated using random and complicated algorithms. This makes it difficult for cybercriminals to guess and use it successfully. OTP codes/tokens may only be valid for a short period. This method requires the user to have prior knowledge of the word OTP or present challenges to the user with specific order such as “Enter the second and fifth digits”. All of these measures are taken to further reduce security risk when compared to password authentication.

How to implement OTP

Since OTP requires a large number of message transfers and delivery accuracy, brands should implement it through trusted service providers. They should investigate recognition: has the company successfully served clients in industries like banking and finance before? and measure performance e.g. volume of delivery and timeliness. Since OTP is an instant delivery method, brands cannot afford the delayed response time that will lead to user dissatisfaction.

WhatsApp OTP vs SMS OTP

Nowadays, OTP can be delivered via text SMS and WhatsApp. With WhatsApp, the process of sending OTP is proved to be easier and more secure than SMS.  Without any encryption provided in SMS, OTP codes will be more vulnerable and their dependence on the operator’s network can also be tapped. Technically, many security holes can be cracked. In addition, SMS is tied to a specific phone number, this makes it easy for hackers to identify if they want to commit a crime.

There are several possible lines of attack with SMS OTP:

SIM Swaps and Hacks

Your SIM card automatically sets up your phone to choose which carrier to connect to, and which phone number to connect with. In a SIM swap attack, the perpetrator convinces your carrier to swap your number for the SIM card they own. As a result, they can access all OTP SMS messages synced with your account.

Account Takeover

Many wireless service providers allow users to view text messages in their web portal. If your online account on a web portal is protected only by a weak or common password, an attacker can hack the account and gain access to any SMS OTP messages.

Lost and synced devices

In theory, losing your phone means you shouldn’t be able to receive OTP SMS messages. However, we can now sync messages between different devices, allowing us to authenticate via SMS OTP and access accounts even without a phone. Forwarding such sensitive messages is not a strong security practice, especially if your email contains a password that can be guessed.

Phishing

In a psychological manipulation attack, a perpetrator posing as an employee of a trusted service tricks you into handing over your account credentials and SMS OTP. Phishing attacks rely on exploiting users’ feelings or lack of knowledge and can result in SMS OTP leaks in the same way as passwords.

Extra Security with WhatsApp OTP

Seeing how vulnerable text messages are as an OTP authentication platform, now is a good time to switch to OTP WhatsApp. To maintain the security of privacy data, business owners have started to consider switching from SMS OTP to WhatsApp OTP.

You can use SendTalk by TapTalk.io, an OTP service provider that uses WhatsApp as a platform to send OTP codes. In addition to sending OTP messages, you can also send notifications such as account activity, reminders, purchase confirmations, delivery notifications, and even alerts to your customers.

Many experts admit that sending OTP codes via WhatsApp is safer than using SMS-based OTP because of the additional encrypted security layer. Not only does it send secure OTP codes, but SendTalk also offers more consistent message delivery. You can get a faster chat delivery duration via WhatsApp because there will be no more obstacles due to the providers’ services.

Shifting to WhatsApp OTP is also beneficial with lower costs. Compared to SMS-based OTP, SendTalk will be more profitable than SMS-based OTP services. With SendTalk, imagine how much money you can save, instead of using SMS-based OTP which costs around IDR 350.00 to IDR 500.00 per message. The rates offered by SendTalk are certainly more affordable than SMS-based OTP.

There are so many more features from SendTalk that will make your company more reliable in keeping customer’s personal data and reduce data security risk. Curious to know more about SendTalk? You can click here.