What is an OTP?
A one-time password (OTP) is a security code that is only good for one login attempt or single transaction. It’s a more secure method of logging in than just using a regular password, as it adds an extra layer of protection.
These codes are now a key part of digital security. They’re designed to protect you from cybercrime and fraud by adding a second layer of verification. It’s also a major component of multi-factor authentication (MFA).
In this article, we’ll explore how OTPs work, the different kinds of OTPs, where they are used, the benefits they provide, and any possible risks to keep in mind.
What is a one-time password (OTP)?
A one-time password (OTP) is a password that’s created automatically and can only be used once for a single login attempt or transaction. Because they change, OTPs are considered a type of dynamic password.
Regular passwords stay the same unless you change them. OTPs, on the other hand, are temporary and can’t be used more than once. That’s what makes them so effective at preventing password theft and replay attacks, where someone steals and reuses your login information.
OTPs are a “something you have” form of authentication. You often see them used with a traditional password (“something you know”) to create an extra layer of security when you log in to your accounts.
How do one-time passwords work?
One-time passwords, or OTPs, are designed to be unpredictable, to work only for a limited time, and to be used only one time. Encryption methods are used to make them truly unpredictable.
OTP generation
Time-based algorithms (TOTP) and hash-based algorithms (HOTP) are the methods most commonly used to generate one-time passwords. These algorithms rely on a secret key and a counter (either time- or event-based) to generate the OTP.
OTP delivery and verification
OTPs are most often delivered via SMS (text message), voice call, or push notification to a smartphone or other device. You might receive an OTP via email, but that’s considered less secure than delivery via SMS.
When a system receives an OTP, it compares it to a code that the system itself generated using the same algorithm and secret key. If the OTPs match and the time or event counter is within the accepted window, authentication is successful and you’re allowed to log in.
Types of one-time passwords
There are a few different methods for generating one-time passwords, and they each have their own strengths and weaknesses.
Time-Based One-Time Passwords (TOTPs)
TOTPs use the current time as part of the code-generation algorithm. Because of this, they’re typically only valid for a short time, often 30 or 60 seconds. If you’ve ever used Google Authenticator, Authy, or another authenticator app, you’ve used a TOTP.
Hash-Based One-Time Passwords (HOTPs)
HOTPs use a counter that increases each time you use one. To make sure the password is valid, the device generating the password and the server receiving the password must be synchronized. HOTPs are often used in hardware tokens or in software when you can’t be sure the time is correct.
Transmission-Based OTPs
These are the OTPs that are sent to you through a communication channel, such as SMS text, a phone call, or an email. If you’ve ever ordered from Deliveroo, you’ve likely used this type of OTP.
OTP delivery methods: SMS, voice, and push notifications
There are several ways to deliver an OTP to a user.
SMS OTPs
The most common way to deliver an OTP is as a text message to a mobile phone. Because nearly everyone has a mobile phone, SMS OTPs are widely used.
However, SMS messages are vulnerable to interception and SIM swapping attacks. Security system Signaling System Number 7 (SS7) flaws can also compromise the security of OTPs sent via SMS.
Voice OTPs
Another way to deliver an OTP is via an automated voice call. This delivery method works well for users who don’t have smartphones or reliable internet access.
However, voice OTPs can be less convenient than SMS or push notifications because you have to listen to the number and then enter it.
Push notification OTPs
A more secure option is to send an OTP as a push notification to a mobile app. Push notifications offer a better user experience than SMS messages.
Keep in mind that push notification OTPs require the user to have the app installed and to have enabled notifications from the app.
What are the benefits of using one-time passwords?
OTPs offer a lot of advantages for security and ease of use.
Enhanced Security
OTPs are a strong tool against unauthorized access. Because they’re only good for one use, they stop hackers from using stolen passwords to get into your accounts.
Improved User Experience
OTPs are really easy to use. Instead of having to make up a complicated password, users just get a code sent to them. That’s it.
Compliance with Regulations
If you run a business, OTPs can help you follow data privacy rules like GDPR. They’re a key part of something called “strong customer authentication,” which many regulations require.
Automated Password Management
For IT departments, OTPs can make password management a lot easier. It automates the process, which saves time and effort.
Real-world use cases of OTPs
You’ve likely encountered OTPs in a variety of everyday scenarios. They’ve become a cornerstone of online security across numerous industries.
Banking and finance
In the financial world, OTPs are used to verify high-value transactions, helping to prevent fraud. You might receive one when you activate a new bank card or transfer a large sum of money online. They also add an extra layer of security when you log in to your online banking accounts, ensuring that only you can access your financial information.
E-commerce
Online retailers use OTPs to authorize payments, preventing unauthorized purchases. You’ll often see them when you’re completing a transaction, adding an extra step to confirm it’s really you making the purchase. OTPs also verify user accounts during registration and login, making sure that only legitimate users can access the platform.
SaaS and cloud services
Software-as-a-Service (SaaS) and cloud services rely on OTPs to protect sensitive data stored in cloud-based applications. They’re frequently used as part of multi-factor authentication processes, adding an extra layer of security to SaaS platforms and ensuring that only authorized personnel can access confidential information.
Healthcare
In the healthcare industry, OTPs play a vital role in protecting patient data. They’re used to secure access to electronic health records, safeguarding patient privacy and ensuring that sensitive information is only accessible to authorized healthcare providers. They also ensure secure communication between healthcare providers and patients, guaranteeing that confidential medical information remains protected.
What are the risks of OTPs?
While OTPs add a layer of security, they aren’t foolproof. Here are some of the risks:
- SMS Vulnerabilities: SMS-based OTPs have some weaknesses. They can be intercepted through SIM swapping (where someone transfers your phone number to their SIM), or flaws in the SS7 network (a protocol used by cell carriers). Phishing and spoofing attacks can also trick you into giving up your OTP.
- Push-Bombing: Attackers might try to overwhelm you with a ton of OTP requests, hoping you’ll accidentally approve one.
- Man-in-the-Middle (MITM) Attacks: MITM attacks involve someone intercepting the OTP while it’s being sent to you.
- User Error: Ultimately, OTP security relies on you being careful. If you share your OTP, or enter it on a fake website, it defeats the purpose.
How do I implement OTP messages?
Adding OTPs doesn’t have to be complicated. Here’s a practical guide:
- Choose how to send your OTP. SMS is common, but voice calls and push notifications are also options. Think about the security and ease of use of each.
- Work with an OTP provider. Using a service designed for OTPs makes things much easier. For example, MailerSend has APIs that let you send OTPs through email and SMS.
- Create and check your OTPs. You’ll need a way to create random numbers and set a time limit for each OTP. Then, create a system to make sure the entered OTP is correct.
- Design your user interface. Add a spot on your login page where users can enter the OTP they received.
Putting It All Together
In today’s world, online security is more important than ever. One-time passwords (OTPs) are a highly effective security measure that can protect you from unauthorized access to your accounts and sensitive data.
Using OTPs offers several benefits for both businesses and individuals. OTPs dramatically improve user security, reduce the risk associated with weak or compromised passwords, and help organizations comply with increasingly stringent data security regulations.
If you’re not already using OTPs for online authentication, now is the time to start. By implementing OTPs, you can significantly reduce your risk of falling victim to cyber threats and better protect your valuable information. If you’re a business, implementing OTPs could be a crucial step in protecting your customers and your brand.