OTP Messages: Are They Still Reliable? Unmasking Vulnerabilities and Exploring Safer Alternatives

Leading tech giants like Meta, PayPal, and Amazon are driving a shift towards more robust security measures, emphasizing the need to move beyond traditional username and password authentication. In response, OTP messages have gained widespread adoption as a seemingly convenient solution. However, the reliability of OTP messages as a security measure is increasingly questionable. Unfortunately, the vulnerabilities inherent in SMS technology make OTP messages susceptible to a range of cyberattacks, from SIM swapping to SS7 exploits. As threat actors become more sophisticated, the risks associated with relying solely on OTP messages for authentication continue to grow. Fortunately, there are more secure and efficient alternatives available. This guide will delve into the shortcomings of OTP messages and explore robust options to protect your users and business.

OTP, or One-Time Password, is a security token delivered to a user's device, typically a mobile phone, for the purpose of verifying their identity. This dynamic code replaces static passwords, providing an additional layer of protection against unauthorized access. When a user attempts to log in to an online account or perform a sensitive transaction, they are prompted to enter a unique, time-sensitive code sent to their registered device. This mechanism enhances account security by making it significantly more difficult for malicious actors to gain unauthorized access, even if they possess the user's credentials.

With the rise of cyberattacks and data breaches, maintaining and improving data security is no longer an afterthought and implementing two-factor authentication (2FA) adds an extra layer of protection against them. According to Market Research Future, the two-factor authentication market size is expected to grow from USD 14.65 billion in 2022 to USD 44.67 billion by 2030 and it’s said that OTP accounts for about 56-60% of the market value.

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Their simplicity and reliance on ubiquitous mobile phones contributed to their rapid ascent in popularity. The convenience of receiving a code directly to one's device made OTP messages a user-friendly choice. Moreover, the perception of OTP messages as an additional layer of protection against unauthorized access has further fueled their adoption. However, it's crucial to recognize that while OTP messages offer a valuable security enhancement, they are not infallible and should be part of a comprehensive security strategy.

Verifying a user's identity via SMS OTP isn’t as secure as you think. Aside from security, there are other reasons for you to consider other authentication methods. Here are the common security issues of SMS OTP verification and why you should ditch it.

SIM swapping can give hackers access to all your online accounts. A hacker can call your mobile service provider, pretend to be a victim, and activate a new SIM with your number.

The hacker will then breach any 2FA that uses your phone number as a second authentication method. Because most online accounts require an SMS verification, if the hacker can intercept that SMS, they can change the user’s account password, access sensitive user data, and even steal your money if the target account is an online banking platform.

SIM swap fraud is increasingly becoming popular year after year. In 2021, for instance, cybercriminals stole a staggering $68 million, according to FBI data.

Signaling System No.7, commonly known as SS7, is fundamental to all mobile communications. The SS7 is simply a standard that facilitates SMS, calls, number translation, and other telephony services like call forwarding.

So, how does it subject SMS to security risks?

The protocol has a flawed design that hackers can exploit to intercept calls and SMSs, including one-time passwords. Hackers can exploit security vulnerabilities in the SS7 protocol to compromise and intercept OTPs on a cellular network.

And the scary part? Doing so isn’t hard!

All a hacker needs to intercept your SMS is a computer running Linux and the SS7 SDK—which can easily be downloaded online.

When it comes to SMS security, the user is the weakest link in the security chain.

Hackers have upped their phishing (a form of social engineering) game and can use their skills to obtain OTPs from unsuspecting individuals. Studies show that SMS-based scams, also known as “Smishing attacks,” soared by 328% in 2020 alone.

Hackers are increasingly using smishing to trick unsuspecting users into revealing the OTP codes. Organizations can eradicate these attacks by educating users on the importance of securing these codes. Alternatively, they could adopt a verification method that doesn’t leave users with anything that hackers can steal.

SMS authentication may be an easier authentication method for users but very expensive for organizations. Companies pay for every SMS message delivered to their users, which can result in substantial monthly bills.

Furthermore, many SMS OTPs never get delivered even though you pay for every message sent out. Price varies significantly across providers and is also determined by the volume of SMS messages being set out. Worst of all, the cost of attack resulting from weak SMS authentication can be catastrophic to an organization.

SMS OTPs are user-friendly and make it easier for users to log into online applications and services. In fact, more than 60% of users worldwide use SMS OTP to log in to their favorite services.

However, SMS verification can give users a gruesome experience if the OTPs aren’t delivered. Suppose you wanted to access online banking to pay for services, but the bank’s system fails to or takes minutes to deliver an OTP. This could present you as untrustworthy and even make you lose a business opportunity in the worst-case scenario.

Luckily, there are secure and reliable SMS OTP alternatives you could use to avoid all the security and other issues associated with OTPs. These include:

WhatsApp is currently the most popular messaging app with approximately 2 billion active users as of 2022. Login by WhatsApp, or WhatsApp OTP, is more secure than SMS OTP since WhatsApp implements end-to-end encryption, ensuring that only the sender and the recipient can read the messages. This is an incredibly secure way to reduce fraud and trojan attacks.

Moreover, WhatsApp OTP is significantly cheaper than SMS OTP, allows you to conduct drip campaigns that are much more effective than automated campaigns done through email or SMS, and also helps you increase app conversion rate since WhatsApp messages have higher open and reply rates.

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Businesses are increasingly using social logins as an alternative to SMS OTP.

For an end-user, convenience is everything and that’s what social login is all about! With social logins, users can sign up for many websites or applications without having to input their credentials repeatedly.

The login credentials usually come from a social media platform like Facebook or Twitter and these platforms are usually tech giants who make data security one of their top priorities. The benefits of social login are many. It’s convenient, cost-effective, and increases user engagement. Moreover, you can get some user data from these social platforms when they sign up via social login.

Recently, three tech giants, namely Apple, Microsoft and Google, announced that they would jointly commit to the FIDO (Fast ID Online) Alliance standards using mobile devices for authentication in order to replace passwords, which are inherently vulnerable to hacking. What this means is that smartphones will server as secure passkey stores. Users can easily access the passkey stored by presenting something that they are (biometrics), something that they know (a PIN or pattern), and something they possess (smartphone) within a single action. This is not only more secure but also much more convenient for users as they can easily log into any app or websites by confirming a prompt on their phones.

SMS OTP are one of the most common ways to verify logins and transactions.

However, they suffer from major drawbacks, including friction in user experience and risks of sim swaps and social engineering scams.

By integrating your apps with Authgear, you can implement a variety of authentication methods, including WhatsApp OTP, social login, biometric authentication, and more, to avoid all the problems associated with SMS OTPs, enjoy significant cost savings, increase app conversion rate, and increase marketing ROI.

Contact us to learn more about Authgear to find out how our services can not only protect your users but also help your business grow.