What is OTP in Credit Card Transactions and Why is it Crucial?

February 22, 2022 · Geraldo Figueras

What is OTP in Credit Card Transactions and Why is it Crucial?

What is OTP in credit card transactions? In a nutshell, OTP is one of the most effective ways to protect your data online. It protects not only general online accounts but also your credit card transactions.

As technology develops, so do new security breaching possibilities. Cybercriminals create new methods to break into systems, completing a typical technological cycle. 

Every year, countless frauds occur throughout the world, many of which to credit cards. As a result, banks have implemented OTP authentication to make credit card security more impregnable. 

So, what exactly is an OTP and how does it work with credit card transactions?

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Understanding OTPs

One Time Password, or OTP, is a string of randomly generated numeric characters used for single-transaction user authentications.

Think of it as an added layer of security used while making a credit card transaction.

Any person who gets your card or a photo of it can see all its information. The credit card alone is not safe.

That’s not the case with an OTP system. If someone else uses your card, they won’t be able to complete the transaction. They’ll need to input the OTP that only you can have access to.

One of the most significant benefits of OTPs is that they are immune to replay attacks. This means that an intruder who accesses a recently used OTP will be unable to exploit it. Unlike regular passwords, they will no longer be valid.

How Does It Work?

OTPs come in the form of a six-digit code sent to a registered number when a credit card payment is made. Inputting the code then confirms the transaction. 

OTPs are used across platforms for e-banking and other systems containing sensitive data. They are safer than static passwords which are consistent across platforms and can be abused by anybody. 

OTPs are created only once and have a time restriction in which they must be entered. 

Many users get the OTP (One Time Password) through PIN-protected security tokens, also known as OTP tokens. This provides an extra layer of protection, although putting more hurdles on the user. For logging in, the user must input the one-time password along with the added information. 

An example of a physical form of added security in relation to OTP, is the banking token. It’s a simple physical device that helps authenticate digital banking users. 

Banking tokens enable users to use multi-factor authentication requirements for transactions. They are compliant with certain authentication conditions depending on the model or type of device. 

In other words, banking tokens can function as physical OTP solutions.

Common Questions

Will I be charged by the bank if I seek an OTP?

No, generating an OTP is free, and financial institutions don’t charge you to use this service.

Is it possible to get the OTP by voice call?

Yes, certain institutions will provide you with an OTP via an automated call if you are authorized. On your registered mobile number, you will receive a call from an automated voice informing you of the OTP verification. 

I couldn’t use a password that was generated for me. Is it okay if I use it again?

You will not be able to authenticate any transaction if you do not use a password generated within usually 10 minutes of it being generated. You will need to request a new OTP.

What should I do if I didn’t ask for an OTP?

If you receive an OTP that you did not request, contact the institution immediately alerting them that you received an OTP despite not requesting one.

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Is there anything else you would like to know about OTPs in credit card transactions? Let us know in the comments.