SMS OTP: Benefits, use cases, and how to choose a provider
To ensure privacy and security while streamlining access to your platform or data, you should consider SMS OTP. Here’s everything you need to know about it.
What is SMS OTP, and why should you use it?
SMS OTP (One-Time Password or One-Time PIN) is a security mechanism that sends a unique, time-sensitive code via SMS. It is used as a part of a two-factor authentication (2FA) system to verify a user’s identity during login or sensitive transactions.
Implementing 2FA is crucial in many industries to comply with data protection and security requirements, and SMS is one of the simplest and most cost-effective ways to do that.
Real example of an SMS OTP from Spoon Radio, one of Infobip’s customers.
Sending OTP codes via SMS offers several benefits:
- Widespread use: By default, SMS is available on virtually all mobile phones. Users don’t need to install additional apps or configure settings to receive OTP codes in SMS.
- Highest delivery and open rates: SMS messages are delivered directly to users’ mobile phones without getting lost in spam filters or cluttered inboxes. Also, most SMS messages are opened in a matter of seconds, especially in cases where users need an OTP code to access an account.
- Reliability: SMS is fast and reliable and doesn’t depend on an internet connection, which makes it one of the most popular channels for delivering time-critical OTP codes.
Most common use cases of SMS OTP
Banks and fintech
SMS OTP ensures that only authorized users can access their bank accounts, make payments, or perform other financial operations securely.
- For example, Leanpay decided to introduce Infobip’s SMS 2FA solution to ensure simple and secure onboarding for its customers. With this, they achieved 20% MoM growth in number of registered users.
E-commerce
For e-commerce businesses, implementing an additional step during account registration, password resets, and high-value transactions protects their customers against fraudulent activities and enhances trust.
- Bukalapak, one of the largest online marketplaces and e-commerce companies in Indonesia, increased security by implementing SMS OTPs for transactions, logins, registrations, and any account detail changes such as email or phone numbers.
Digital platforms
A large number of social networks, online messaging platforms, and streaming services also use SMS OTP to verify user identities and secure accounts.
- Spoon Radio, an audio live streaming service, implemented our SMS 2FA solution to deliver OTPs in 500 milliseconds. With this, they achieved an 80% reduction in subscribers dropping out of the sign-up process.
- KakaoTalk, a free mobile instant messaging app based in South Korea, implemented SMS OTPs and achieved a conversion rate of more than 90%, with far greater levels of customer satisfaction than before.
Examples of SMS OTP use cases in other industries:
- Public services: Authenticating personnel accessing critical systems (e.g. police and fire departments or emergency response teams).
- Delivery services: Verifying personnel and ensuring secure package handling.
- Educational institutions: Securing access to student portals, course registrations, and academic resources.
- Hotels and airlines: Enhancing security during online bookings, reservation changes, and loyalty program interactions.
How does SMS OTP verification work?
Let’s break down the process step by step (see image):
1. User initiation
When a user attempts to log in or perform a sensitive transaction (such as resetting a password or confirming a payment), they trigger the OTP process. The platform then generates a unique, time-sensitive one-time password which serves as a temporary code the user will receive via SMS.
2. SMS delivery
The platform sends the OTP to the user’s registered mobile phone number via SMS.
3. User confirmation
The user enters the received OTP into the application or website where they are attempting to authenticate. By doing so, the user confirms their identity.
4. System authorization
The system compares the entered OTP with the one it generated. If the OTPs match, the system authorizes the user’s access. If not, access is denied.
How to choose an SMS OTP provider
Choosing the right SMS OTP provider is crucial for ensuring security and reliability of the authentication process. Let’s explore the key criteria you should consider before deciding:
1. Deliverability and speed:
– Look for providers that offer guarantees in delivering SMS messages promptly to customers. Delays in OTP delivery can impact user experience and security.
2. Security features:
– Evaluate the encryption methods used by the provider. Strong encryption ensures that OTPs remain confidential during transmission.
– Consider data protection mechanisms, such as secure storage of phone numbers and OTPs.
– Ensure the provider complies with relevant regulations (e.g., GDPR, CCPA) to safeguard user privacy.
3. Integration:
– Assess how easily the SMS OTP solution integrates with your existing systems. A seamless integration process minimizes disruptions and saves time.
– Check if the provider offers APIs or SDKs for smooth implementation.
4. Pricing:
– Compare costs among different providers, considering initial setup fees and ongoing charges. However, note that a lower price might mean lower-quality SMS routes, which could lead to OTPs not being delivered.
– Scalability is essential—ensure the pricing model aligns with your expected growth.
Other common questions about SMS OTP
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