How OTPs secure credit card transactions?

An OTP protects your credit card transactions. It is one of the catalysts behind the surge in credit card usage

We live in the age of online transactions and money transfers. However, the convenience of transacting from home is often accompanied by the fear of the security of online transactions. Knowing how transactions work reduces the uncertainty, helping transact without worrying. On that note, let us understand the process followed in online card transactions and the role of OTPs (One-time Passwords) in carrying them out.

How do online credit card transactions work?

Knowing how a credit card transaction works helps you understand the importance of an OTP in a credit card transaction. Only after learning this process can a first-time credit card user understand the importance of the additional layer of security provided by OTPs.

There are four components in a credit card transaction – the customer, the merchant, the merchant's bank, and the credit card issuer. Here is the step-by-step delineation of how online credit card transactions are carried out, including the role of the various parties involved:

1. The credit card owner keys in their card number

In the first step, the credit card owner enters their card number to make a payment. The first step also includes other modes of providing credit card details, such as swiping/tapping/or inserting the credit card into a machine.

2. The card's information is sent to the merchant's bank for approval

The merchant's bank receives the card's information for approval and sends this information to the appropriate card network, like Visa, Mastercard, etc., for authorisation.

3. The card network contacts the card owner's bank

In the third step, the concerned card network contacts the card owner's bank and routes the credit card information.

4. The card owner's bank conducts a verification

In the fourth step, the card owner's bank verifies the authenticity of the credit card's number and CVV (Card Verification Value) and checks the remaining credit on the card to cover the expense.

5. The card owner's bank responds to the merchant's bank

Once the authenticity of all credit card details is checked, the card owner's bank relays this information to the merchant's bank.

6. The card owner receives an approval notification

In the last step, the card owner receives a notification confirming the transaction's success. The merchant's POS (point of sale) machine receives a similar message in the final step.

What is an OTP?

A One-time Password is a numeral code sent to your phone while carrying out an online card transaction. It helps a bank verify a credit card transaction. OTPs are now used to verify debit card transactions and act as resilient layers of security for online transactions.

How are OTPs used in credit card transactions?

OTPs are generally four to six-digit long numerals that constitute an additional layer of security provided to credit card transactions. Your credit card must be linked to your registered mobile number to receive an OTP. As part of OTP verification during a credit card transaction, an OTP is sent to your registered mobile number .

This OTP is usually valid for up to 8-10 minutes, and you must enter it in a field provided on the payment gateway. Once the OTP is verified from the bank's end, the transaction is approved.

What are the benefits of credit card OTPs?

Now that you understand the functioning of credit card OTPs, let us understand their importance and how a credit card owner can benefit from them:

· OTPs provide a one-password solution

OTPs provide a customer with a one-password solution. They simplify the complicated procedure of having to key in multiple passwords.

· Acts as an additional layer of security

Even if a third person owns your credit card, they cannot carry out any transaction unless they key in the OTP received on your registered mobile number.

· Helps you stay alert

In case you receive an OTP to authorise a credit card transaction, you can be sure about your card being misused and alert the bank at the earliest opportunity.

· The procedure is simple

Validating your credit card transactions with an OTP is a straightforward and hassle-free process that takes a few seconds to finish.

Credit cards, provided their transactions are OTP-verified, are a great way to increase your purchasing power. IDFC FIRST Bank’s credit cards also provide excellent rewards, helping you earn by spending money. You can also enjoy other privileges, including airport lounge access.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.