OTP-Based Authentication For Payments Can Be Replaced With Something New (RBI's New Notification)


Mohul Ghosh

Mohul Ghosh

Feb 09, 2024


The latest monetary policy unveiled two significant fintech-focused action plans from the Reserve Bank of India governor including facilitating regulatory sandbox experiments around alternative authentication beyond OTPs and enabling offline usage support for the blockchain-based digital rupee pilots currently underway.

OTP-Based Authentication For Payments Can Be Replaced With Something New (RBI's New Notification)

Both intervention aims respond to ground adoption needs from convenience, security and accessibility standpoints amidst India’s booming payments ecosystem march.

Easing Over-Reliance on SMS OTPs

Highlighting various secure credentials management technologies have emerged as alternatives to clunky SMS-based one-time passwords, RBI will devise principle-based frameworks allowing banks exploring their integration for transaction validations.

This intends easing chronic consumer pain points around myriad OTP wait times for card payments or funds transfer by letting lenders test innovations like time-bound soft tokens, biometrics, cryptographic keys. Better onboarding and progressive authorization hold the key for unlocking innovation.

Offline Digital Rupee Payments in Poor Connectivity Areas

Similarly, RBI acknowledged scope for facilitating offline digital rupee payments without requiring internet connectivity for communities in rural areas or disaster response scenarios through appropriate modifications supporting local transactions.

Pilots are currently examining online use cases only given blockchain’s inherent technical constraints. Unlocking true umbrella coverage requires factoring the 27% citizens bereft of reliable data access still through creative decentralization constructs eventually.


Mohul Ghosh
Mohul Ghosh
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