No More OTPs, India's Shift to Password less Transactions

Digital transactions are now extremely common and occur every day in huge numbers. However, they do not come without the chances of frauds. One concept that is being used to carry out such frauds is none other than the one-time password or OTP. There have been many instances where OTPs were used by fraudsters to steal money from people's bank accounts.

To overcome this, the concept of OTP might see an exit. Not just India, but cyber fraud regulators around the world have been rethinking over this matter for years.

Digital India: A Shift Away from OTPs

The country has been seeing a shift from one-time passwords for digital transactions to password-less means of authentication methods. This seeks to increase security, improve user experience and also make it easier to manage online accounts. Various mechanisms of passwordless authentication include biometric verification, device-based authentication and push notifications.

OTPs have currently established themselves firmly as a fundamental component in the realm of online transactions in India. In fact, as per experts, India will witness a significant increase in the worth of digital transactions in the coming time. Regulating frauds using OTPs thus needs to be controlled.

New regulations are coming into functioning to curb OTP-related frauds. They will pose the need of telecom operators to trace the origin of transactional messages, thereby enhancing security standards.

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Digital Transformation in India – Reasons for the Shift

By 2026, the country is expected to see its total valuation of digital transactions soar to $10 trillion. Following are some of the reasons that are making the shift to passwordless transactions inevitable:

Enhanced Security

Cyber attacks and data breaches are continually rising. Hence, the need for password less authentication is the need of the hour. This will present a way more secure environment compared to that created with the traditional password-based systems. OTPs are highly vulnerable to SMS interception and phishing attacks, and thus pose a significant threat for users as well as financial institutions.

Improved User Experience

India is home to its first mobile generation, who is always on a lookout for more convenient ways to carrying out digital transfers. To make their access to digital services easier, this shift is necessary. It will not only eliminate the need to remember complex passwords or wait for OTPs, but also make the whole process smoother, more seamless as well as user-friendly.

Regulatory Changes

The Telecom Regulatory Authority of India (TRAI) introduced and implemented new regulations for better tracing transactional messages like OTPs in order to prevent frauds. This mainly focuses on customers who may potentially face difficulty with services such as online payments, delivery of parcels, etc, as transactions are linked with OTPs. The guidelines are going to be applicable across categories like banks, financial institutions and commerce platforms to name a few. Additionally, any messages, that are found attached with mismatched sender details, or are without a clear sender identity, will be blocked.

The Role of RBI

Even the Reserve Bank of India is in favour of the shift. RBI has also been encouraging the adoption of alternate methods of authentication. It has already proposed a principle-based framework for AFA in digital transactions, where AFA refers to Additional Factor of Authentication. This is being seen as a welcome step towards bolstering security in digital transactions.

This way, the shift will help reduce frauds, reduce costs otherwise associated with password and OTP management, and simplify login and transaction process.

Password-Less Authentication Mechanisms

While biometric verification uses fingerprint, voice recognition or face scans to verify the user's identity, device-based method verifies the device or its location. Push notifications are simply sent to the mobile device directly. These few methods of passwordless authentication is the future of digital transactions and the related security.

Final Thoughts

These methods are not just cost-efficient, but they are also highly versatile, as one can use them after integration with various platforms including desktop, mobile phones and call centers too. This growing trend will be a game-changer; it will enhance the way we engage with digital services in the country.

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