What is OTP in credit card transaction? - Kotak Bank
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28 APRIL, 2023

Shopping online and paying bills has never been easier, thanks to the convenience of online banking and credit card services. They have revolutionised how we make online transactions and do shopping, providing comfort and security.

With just a few clicks, people can purchase items from anywhere in the world from their laptops or smartphones.

Online banking and credit cards offer a secure and convenient way to shop, allowing users to transfer funds easily, make payments, and manage finances.

By taking advantage of these services, shoppers can save time and money and make informed decisions when making purchases.

However, there are potential security risks when paying online through a credit card. Thanks to OTPs, thieves cannot steal money from a person, letting individuals do online transactions with complete security. So, what is the OTP in credit card transactions? Read on to find more.

What is OTP in credit card transactions?

OTP stands for One-Time Password. It is a unique combination of four to six randomly generated numerical digits to authenticate online banking and credit card transactions.

OTPs help protect one’s personal information and financial data from hackers by greatly reducing the chances of identity theft. OTPs also act as an extra layer of security, confirming that it was indeed the person who initiated the transaction.

An OTP adds a layer of security above a user-generated static password. It is only valid for one transaction or login session. Nowadays, there is no credit card transaction without OTP.

How OTP works?

Suppose a person uses an online platform to buy a washing machine. Once they select the product and go to the payment page, they have to choose the payment method.

Consider that they choose a credit card. They must now input the card information. After entering the account information to complete an online transaction, they get redirected to a screen where they have to click “Get My OTP number.”

The bank sends (SMS/email) the OTP to the registered mobile number and email address. The person has to input the OTP to finish the authentication procedure, which is only valid for a short period. They have two additional opportunities to click on “Resend OTP” if they do not get the OTP immediately.

By entering the OTP, the cardholder can confirm that the legitimate cardholder is making the purchase.

OTPs are a simple but effective way of authenticating cardholders and can help reduce the risk of fraudulent activity on credit cards.

Why is an OTP necessary for credit card transactions?

The importance of an OTP for credit card transactions cannot be underestimated. Today, an OTP provides the user with a layer of security and assurance that their information is secure and their transactions are not vulnerable to fraud.

By providing an extra layer of authentication, OTPs ensure that the person making the transaction is the rightful owner of the credit card.

This extra layer of security helps protect the consumer, the merchant, and any other involved parties. OTPs ensure that the transaction is legitimate and that the user is who they say they are, preventing fraud and unauthorised access.

Read Also: क्रेडिट कार्ड की स्टेटमेंट

Pros of using OTP in credit card transactions

Using OTP in credit card transactions has numerous benefits; some of them are:

  • OTP provides an extra layer of security to credit card transactions by ensuring that only the cardholder can access their account information and make a transaction.
  • OTP eliminates the possibility of identity theft, as OTP is sent to the cardholder’s mobile number and email ID.
  • With an OTP system, banks can ensure that confidential information is only seen by authorised personnel, reducing the risk of a data breach.
  • Since OTP does not involve a password, there is no need for customers to remember lengthy passwords, helping reduce time and frustration during transactions.
  • Even if a credit card gets stolen and the user has access to the CVV and card information, they can still not make an online purchase. Since the OTP gets delivered to the cardholder's registered mobile number and email address, only the cardholder can access it.

Cons of using OTP in credit card transactions

OTPs have some flaws despite their advantages.

  • OTPs are vulnerable to user error. If a cardholder mistypes a single character of the OTP, then the transaction gets rejected.
  • OTPs are time-sensitive, meaning the transaction gets cancelled if a user does not enter the code within the designated period.
  • A weak mobile signal, a terrible internet connection, or both may prevent consumers from receiving their OTPs. This might be a significant issue, particularly if they live in a spot with poor signals.

How to secure credit card transactions?

Credit cards have become an invaluable tool for safe and secure online transactions, with many banks offering attractive rewards and protection against fraud.

However, to further enhance the security of the best credit card in India, consider the following advice:

  1. Avoid revealing the data of the credit card in public. Everyone has the right to decline if a cashier or store clerk asks them to give them their credit card information since once they have it, anybody can use it.
  2. Be cautious while entering credit card information Before entering any information, users must ensure that they are on a secure website or app.
  3. Never save credit card information on apps or websites. Criminals or hackers might steal credit card information if a website or app gets hacked.
  4. Keep an eye on the notifications and statements of the credit cards. In this manner, you can track any unlawful transactions.
  5. Never reply to emails or texts that request credit card information. These are often “phishing” scams, in which fraudsters deceive people into entering their credit card information on a malicious site.

Read Also: National Electronic Funds Transfer

Conclusion

Credit cards are a safe, reliable, and convenient payment method for online transactions, provided customers take the necessary precautions to protect their sensitive personal and financial details.

By understanding how the best credit card in India work and ensuring only to use trusted websites, customers can confidently make secure online purchases with their credit cards.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.