OTP Number - What is OTP & How it Works

Learn how to authenticate your transaction with OTP number.

Key Takeaways

OTP is a banking-industry term for One-Time Password.
An OTP number is a unique security code used for online transactions.
An OTP uses an auto-generated algorithm to help users authenticate their online transactions.
It provides an extra layer of authentication as compared to a static password.
An OTP is valid only for a few minutes and cannot be reused.

Today, when you make an online credit card or debit card transaction, you typically receive an SMS from the bank containing a one-time password or OTP. OTP is a four or six digit number that you must enter (on your mobile or computer) to authenticate an online financial transaction. Today you cannot complete most financial transaction without OTPs. Also, banks sends OTPs in real time to provide an extra layer of security to your time-sensitive transactions. This article explains what OTP is, how it is generated by banks, and its importance.

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What is OTP?

A one-time password or OTP number is a unique security feature for online transactions. Typically comprising 4-6 digits, the OTP is an automatically generated numeric string of characters, which acts as a PIN to authenticate various banking transactions. Valid only for a single transaction or login session, an OTP provides an extra layer of authentication than a user-created static password.

When is OTP generated?

Once you fill in your account details to pay for an online transaction, you get redirected to a page where you have to click on get ‘My OTP number’. At this stage, your bank sends you the instant OTP number via SMS on your registered mobile number. An OTP is valid for a few minutes, and you must enter it to complete the authentication process. If you do not receive the OTP instantly, you can click on resend OTP two more times.

How do banks send OTP Numbers?

Banks typically send OTP numbers via text message on your mobile device and your registered email address.

They may make a voice IVR call on your registered mobile number, wherein you will receive the OTP as a spoken password.

Some OTPs come as security tokens, which are microprocessor-based server smart cards or pocket-size key fobs. These cards produce a numeric or alphanumeric code to gain access to a transaction. This secret code changes every 30 or 60 seconds based on the configuration of the token.

With push notification authentication, you do not have to enter the OTP manually. The code is auto filled in the corresponding tab, and you can approve it with the click of a button.

Benefits of OTP Number

OTP authenticates the account holder and prevents theft attempts.
It is far more secure than static passwords.
Since you can use it only once, you cannot enter the same OTP twice.
The OTP number helps block robots generating automatic profiles to dodge the validation tests, such as the ‘Completely Automated Public Turing test to tell Computers and Humans Apart’ (CAPTCHA).
Some formats allow two-factor authentication, which involves a user-created password and an auto-generated OTP, further adding an extra level of authentication.
Even if your credit or debit card is lost or stolen, fraudulent payments cannot be made with it without OTP validation. As such, OTP protects your credit card from potential fraud.

Final Note

The world is turning increasingly digital. Several websites and stores allow you to use conduct all kinds of online transactions. For such transactions, the OTP number plays a vital role in ensuring the authenticity and security of your financial transactions.

Happy shopping with the DBS Bank debit card! Download the app to open your digital savings account instantly and get your debit card!

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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.