The Reserve Bank of India (RBI) has issued a directive to banks and fintech companies to stop relying on SMS-linked one-time passwords (OTPs) for customer authentication in the wake of rising cyber scams and frauds. The announcement was made by RBI governor Shaktikanta Das during the latest monetary policy address.
According to Das, the regulator wants banks and fintechs to explore alternative authentication mechanisms that are more secure and less vulnerable to fraud. This decision comes in response to the increasing number of incidents where OTPs have been used to carry out fraudulent activities.
The move by RBI reflects the growing concern over the security of OTP-based authentication, which has become an increasingly common target for cybercriminals. With the proliferation of digital transactions and online banking, the reliance on OTPs as the primary means of authentication has made it easier for fraudsters to exploit vulnerabilities in the system.
This development is expected to push banks and fintech companies to invest in developing more secure and robust authentication solutions that are less susceptible to manipulation by fraudsters. While the specific alternative mechanisms recommended by RBI are yet to be disclosed, it is expected that the industry will now focus on implementing multi-factor authentication methods and biometric authentication to enhance security.
In light of this directive, banking customers can expect to see changes in the way they authenticate their transactions, with a shift towards more advanced and secure methods of validation. The RBI’s decision underscores the urgency of addressing the vulnerabilities in the current authentication systems to safeguard customers from the growing threat of cyber fraud.
