Explore authentication methods besides SMS-based OTP, RBI asks fintechs in draft paper

"While OTP is working satisfactorily, technological advancements have made available alternative authentication mechanisms", RBI said in its release on July 31.

The banking regulator RBI has issued a draft framework and sought comments from financial and tech platforms to explore and adopt other authentication mechanisms besides the SMS-based OTP method, which has been in vogue.

While in the past, no specific factor was mandated for authentication by RBI, the regulator noted that digital payments ecosystem has adopted OTP as the primary Additional Factor of Authentication (AFA).

"While OTP is working satisfactorily, technological advancements have made available alternative authentication mechanisms", RBI said in its release on July 31. The proposed draft is expected to encourage the ecosystem to 'widen the choice of authentication factors available' to users and Payment System Operators.

RBI said that to ensure that the payments ecosystem leverages the technological advancements in authentication mechanisms, it has released this draft for digital payments. The framework provides the broad principles for all participants in the payment chain while using various forms of authentication.