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Online payments: OTP SMS still in the race

In the last few days, the net has been flooded with articles and press releases announcing the scheduled end of SMS payment validation. As an active participant in this debate, we felt it was our duty to provide an update. The disappearance of SMS OTP, what is it really?hat's really going on?


The facts

"Online payment: the disappearance of SMS set for 2020" hammered Les Echos, while"Online payment: anti-fraud SMS is not yet dead" moderated La Tribune. As for the Marketing Mobile Association France, quoted by Le Journal du Net, it announces that it would be difficult to do without this "popular and universal channel" in such a short space of time. "popular and universal channel".

Widely used by banks and merchants, SMS authentication authentication is however considered as unreliable and not very efficient for complex transactions.

The challenges of the DSP2

The European Payment Services Directive 2nd version officially came into force on 13 January 2019. Transposed by ordinance into French law, it includes several parts introducing new rules . The latter are mainly of interest to consumers, in particular the obligation of strong authentication for online payments of more than 30 euros in order to reduce fraud in e-commerce.

With the aim of increasing the security of our transactions, the text imposes 3 authentication factors . First factor: a code I know, then a device I own and then a personal characteristic of the customer .However, the SMS only brings together two of these factors.

"Cheaper, safer and more innovative payment services". This is the promise of the new directive.

The latter, unlike the other provisions, came into force on 14 September 2019.

OTP SMS should survive DSP2 for a while

Consumers can rest assured that the entry into force of the "strong authentication" obligation has been largely postponed. A large number of European countries, including France, have already announced that they are granting banks, technical service providers and merchants additional time to comply.

Before throwing stones, it should be remembered that the strong authentication method (3D Secure) used today has largely proved its worth in the fight against fraud in these payments. The fraud rate for authenticated transactions is much lower than for non-authenticated transactions: 0.07% compared with 0.21%, according to the figures of the Observatory of Payment Methods (OSMP). In concrete terms, there was 1 euro of fraud for every 578 euros of online payments (an average fraud rate of 0.173%).


What we think smsmode

The exclusion of SMS OTP in terms of confirmation of banking transactions and other large-scale operations is not in doubt. The only slowdown envisaged will be, as explained above, the compliance time for the smaller players.

However, this does not mean that its use will become completely obsolete. Indeed, the 2FA message can still be used for account confirmation for example. Protecting sensitive company information or customer accounts is an important task for which the simple combination of login and password is no longer sufficient. In this context, two-factor authentication by SMS OTP is sometimes indispensable.

Why choose smsmode for your SMS OTP/2FA strategy?

By opting for the SMS OTP solution from smsmode, you give your service a channel dedicated solely to this type of sending. This means you can route SMS messages with one-time passwords on a priority channel, monitored 24/7, resistant to failure and with a guaranteed immediate reception rate of over 97% in less than a minute!

OTP SMS addresses many 2FA issues (e-learning portal, authentication to remote portals and systems, etc.).

Our support team is at your disposal to help you integrate the OTP SMS and its settings into your account or to answer your questions.