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What Does an “OTP (One Time Password)” Mean? | An Ultimate Guide to OTP (One Time Password)

You are probably aware of the OTP (One Time Password) if you are frequently using the e-banking services that we all utilize at a larger rate nowadays. Also, OTP’s are used in net banking, e-commerce websites, Gmail, and other places. This article will explain what OTP is and most of what you need to know about it. 

What is a One-Time Password (OTP)?

A one-time password (OTP) is a numeric or alphanumeric string of characters that is created automatically and used to authenticate a user for a single transaction or login session. It implies that once a user logs in with a one-time password, then it will no longer be valid and cannot be used again. One-time passwords (OTPs) are also known as dynamic passwords, single-use passwords, or one-time PINs. 

One-time passwords are a type of strong authentication that protects eBanking, and other systems that hold sensitive data. There are various limitations in traditional, static, and user-generated passwords so the one-time password helps in avoiding these limitations. To add an extra layer of security, it is frequently combined with multi-factor authentication (MFA). 

A static password is less secure than a one-time password. Because a static password is one that the user creates and may be used repeatedly. Also, for entering the password, there is no time limit. On the other hand, OTP (one-time password) is a temporary. To use an OTP will not only save you costs and energy, but it will also give your users mental peace, realizing that their credentials are secure. 

How Does a One-Time Password Work?

The user who needs to log into his or her digital account obtains a one-time password (OTP) on his or her mobile device. It supports in the verification of their identity and should be used within a certain time frame. The OTP’s validity expires as soon as it enables access to the account. 

An authentication server is part of an OTP mechanism. The authentication server generates the OTP and sends it to the user through SMS or email. When a user enters his or her OTP, the server verifies it and provides the user access. If someone enters the wrong OTP or is not able to enter within its specific time periods, they can always request a new code to obtain to access to their account.

One-time passwords use an algorithm that generates a unique, random code each time a password is requested. The Hashed Message Authentication Code-HMAC algorithm, which uses time-based information or an event counter, is used to create numeric or alphanumeric values for the OTP.  Users may request and receive the OTP code via SMS, phone call, or email. For further security, each OTP code has a minute or second timestamp.

Advantages of a One Time Password

One-time passwords have the excellent advantage of becoming invalid after a few minutes, preventing attackers from acquiring and reusing the secret codes. 

Passwords formed at random are much safer than passwords created by users. Passwords created by users are typically weak, and usage across many accounts further reduces security.

Another benefit of a one-time password is that SMS is the most common method of receiving OTPs on mobile phones. Users don’t need access to your email in order to do this. As a result, you should avoid using public computers or connecting to an insecure Wi-Fi hotspot to access your email account. 

The user does not have to remember this type of password because it is generated at random.

Even if someone tries to hack your account or your passcode is known in some manner, they won’t be able to use it until they enter OTP.

If you forget your password, you can recover your account using an OTP. When you use the forget password option to reset the password, an OTP will be delivered to your preferred channel (mobile, email, etc.) and you will be able to reset your password after filling out the OTP.

Disadvantages of a One-Time Password

The biggest disadvantage of utilizing one-time passwords is that it may be bothersome for some users. Some sent OTPs may take a long time to arrive or may eventually end up in the spam folder. This is also a cause of annoyance for many users. 

If there is no network or no battery on your phone, and other devices, it becomes incredibly hard. Sometimes, OTP can take a very long time to arrive or not arrive at all due to severe faults. When someone knows your user name, they can open your accounts using OTP, however, this is a rare occurrence that only occurs when your phone is lost. These all are some of the drawbacks that are associated with the one-time password.

What distinguishes Single-Factor Authentication from Two-Factor Authentication?

As the name implies, single-factor authentication uses only one level of verification to confirm your identity, it only requires a username and password before allowing users to access it.

On the other hand, Two-factor authentication (often known as 2FA) is a more difficult authentication method. Two-factor authentication (2FA) adds an extra layer of security to the login process by verifying the identity of the person attempting to log in. Because having stolen login data isn’t enough to gain access to the victim’s account, this extra step of authentication makes it more difficult for unauthorized individuals to acquire access to the account. 


OTP stands for One-Time Password. A hacker cannot access the code beforehand because it is created randomly when a request is made. In this digital era, we all have begun to accomplish the majority of our everyday tasks online, it can be anything – whether it’s shopping, sending or requesting money, and many more. These are no longer limited to bank payments; numerous online websites, such as Google, Amazon, and Flipkart, now require the use of an OTP to log in. Without providing the correct OTP you will not be able to proceed. All online services and websites that hold extremely sensitive and significant information should use one-time passwords.

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