What does a one-time password (OTP) enhance in banking?

A one-time password (OTP) significantly enhances security measures in banking by providing an additional layer of authentication for users during transactions or logins. It acts as a safeguard against unauthorized access, ensuring that even if a malicious actor has stolen a user's primary credentials, they would still need the unique OTP generated for each transaction or session to gain access.

OTPs are time-sensitive and typically sent to a user's registered mobile device or email, which means that they are only valid for a short period and often linked to a specific transaction. This transient nature makes it difficult for attackers to use stolen login information, as they would not have access to the OTP, thereby reducing the risk of fraud and identity theft.

In contrast, while there may be benefits to transaction speed, customer engagement, and account management through various banking technologies, the primary purpose and most significant impact of OTPs is the enhancement of security, making them a critical part of contemporary banking practices.