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How SMS OTP Can Improve Your Customer Security & Privacy?

Guaranteeing good customer experience and privacy for your customers is a strategic requirement for a lot of businesses as the average cost of data breaches to brands is nearing $2 trillion per year according to a McKinsey report. This is where OTP-based authentication is needed because gone are the days when just passwords can protect your customer’s data from cyber attacks. Let’s dive in and go into how you can protect your customers with SMS OTPs.

OTP Auth

SMS OTP, known as One-Time-Password, is a numeric code sent to your customers’ devices for two-factor authentication when they need to access their accounts. 

How Does It Work?

An OTP combines your customer’s regular password and an authentication mechanism that serves as an extra layer of security. Now they are further divided into two types; Time-based One-Time Passwords (TOTP) and Hash-based One-Time Passwords (HOTP).

TOTP authentication relies on time for sending unique passcodes that can only be used for a single login session within a specific time(usually 30-60 seconds). The next time your customer wants to access your application or website, they will require a different time-based passcode.

HOTP can be described as an event-based OTP where the moving factor in each code is based on a counter. In most cases, there is a physical token that consistently generates codes and the code is only valid when you request for it as the generator and server are synced. This is used often by bank customers in Nigeria for two-factor authentication for online banking.

Why Is SMS-Based 2FA Still So Popular?

SMS-based authentication is relatively straightforward, hence the retained popularity. SMS authentication is very easy to deploy and use. Customers have grown accustomed to using it to gain access to various applications and they want quick and seamless authentication experiences and see SMS as a perfect solution, without necessarily considering the security risks.

A few reasons why most businesses stick to SMS-based authentication include:

  • Automation. 

According to Gartner, 20-50% of all customer support calls are password related and SMS has proved extremely valuable in reducing frictions and inefficiencies for customer support centers. Forrester research estimated that large companies spend as much as $1 million to handle resets manually and to avoid that, you should get comfortable with testing SMS messaging when you have great customer service that your clients can rely on.

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  • Integration. 

A lot of businesses find it very easy to use omnichannel messaging solutions that integrate enterprise SMS solutions into their systems. This way, even if their users do not have internet access, they can get all the support they need.

How Can OTP Improve the Security and Privacy of Your Customers?

Prevents Password Theft

Earlier this year (July), Twitter was attacked and 5.4 million user accounts were breached and Twitter had to urge users to implement 2FA to protect their accounts. With 2FA, your customers know that their data is safe with you since they need to confirm their identity with an SMS OTP that is sent to their registered device and which adds extra security and makes it difficult to crack. 

Confidence in Your Brand Grows

When Binance, the crypto trading giant, implemented SMS OTPs to protect users from unauthorized sign-ins and funds transfers, a lot of users lauded the move and they gained more daily users. In a world decentralized by the blockchain revolution, security and trust in a brand’s ability to secure client data is key to doing business.  

Furthermore, using SMS-based OTP gives your business a more professional character as it gives your users confidence that their security is important to you.

Customer Support and Privacy

If customers share secure information with your customer service agents and by extension your business, 2FA ensures that they know you are protecting their financial details and their personal information.

BSG offers you a cloud SMS gateway and other solutions that will allow you to improve your relationship with your customers and convert more.

Can OTPs Be Compromised?

According to Forrester, more than 40% of organizations worldwide use SMS-based OTPs as a primary method of securing user data and they reported that authentication fraud grew by over 50% between 2019 and 2021 and half of those organizations lack the technology to detect authentication fraud. 

While SMS-based OTP authentication adds an extra layer of security to password-only defenses, it still can be compromised. There are now hacking kits that steal OTP codes for the attacker’s chosen targets using an automated bot service now available for purchase which is terrible for businesses.

There are a number of attacks that expose the weakness of OTP authentication and allow attackers to access accounts. These include:

  • SIM-Swapping by porting a customer’s number to another device and SIM card.
  • Man-in-the-Middle Attacks where the hacker inserts himself into the communication channel between you and your customers.
  • Phishing through malware that reads your customer’s data.

Things to Consider When Choosing an OTP Provider

Choosing a dependable OTP provider is very important when setting up a secure authentication system. Here are some important points to consider:

1. Delivery and low latency rates: Always choose a provider that can assure you of better delivery and lower latency rates.

2. Flexible APIs: When implementing an SMS-based OTP authentication system using APIs, then make sure that your provider’s APIs are flexible and easy to implement in your backend systems.

3. Data Security: Your customers’ data should be your utmost priority. BSG is ISO 27001 certified which means we have enterprise-grade security practices.

4. Scalability: Always choose a provider that is flexible and can scale up or down according to your business needs. With BSG’s rent SMS platform, you can add features to your system as your business grows.

Make Sms Work for You and Your Customers

As concerns on privacy and customer experience continue to grow, you have to keep evolving with the times and SMS-based OTPs may be the way forward when it comes to protecting your customers’ data and providing them great customer service.

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