One-time password (OTP)

Identity and Access Management (IAM) plays a crucial role in managing and securing all aspects of digital user access. An essential security concept within IAM is the One-Time Password (OTP), also known as a single-use password.

But what exactly is an OTP? How does it work, and why should you use it? In this comprehensive article, we delve deeper into the world of OTPs. We discuss how they work, the different types of OTPs such as HOTP, TOTP and OCRA, and the benefits of using an OTP. In addition, we look at practical applications and compare OTPs with other security methods. Let’s start with the question: What is a one-time password?

What is a one-time password?

A One-Time Password (OTP), or a single-use password, is a unique series of numbers or letters that can only be used once for authentication. Unlike traditional passwords, which are static and can be used for multiple sessions, an OTP is dynamic and changes with each new session. This means that even if an OTP is intercepted or stolen, it becomes useless as soon as it is used or after a certain period has expired.

The significance of an OTP lies in its unique feature of single use. It provides an extra layer of security that helps to secure access to sensitive information or systems. OTPs are often used as part of a two-step verification process, where the user first enters their regular password and then the OTP. This helps to confirm the user’s identity and protect against unauthorised access, even if the regular password is compromised.

There are different types of one-time passwords, with the following being the most common:

• HOTP (HMAC-based One-Time Password): This is an algorithm for generating one-time passwords (OTPs). It is based on the HMAC algorithm (Hash-based Message Authentication Code). These OTPs are event-based, meaning they are generated based on a counter that is incremented each time the OTP is used. The counter is usually stored on the user’s device. The OTP is generated using a cryptographic hash function that combines the counter value with a secret key.
• Time-based One Time Passwords (TOTP): TOTPs are similar to HOTPs. But where HOTPs change based on the counter, these OTPs are generated based on the current time. TOTPs are typically valid for a short period, for instance 30 or 60 seconds. If you have not used the one-time code within that period, it is no longer valid, and you must request a new OTP.
• OATH Challenge-Response Algorithm (OCRA): These OTPs are generated in response to a challenge issued by the system to which the user is trying to gain access. The challenge usually consists of a random number or a series of characters. Like a TOTP, this type of OTP is often time-bound.

Each of these methods has its unique characteristics, but they all have the same goal: to increase security by making it harder for unauthorized individuals to access sensitive information or systems.

In the context of Identity and Access Management (IAM), OTPs can play a crucial role in ensuring user safety and protecting sensitive data from unauthorized access.

How does it work?

A One-Time Password (OTP) operates in a straightforward, yet effective manner. Let’s go through the process step by step.

1. Generating the OTP: The process begins with the generation of the OTP. This is usually done using an algorithm, such as HMAC-based One-Time Password (HOTP), Time-based One-Time Password (TOTP) or OCRA: OATH Challenge-Response Algorithm. Each algorithm has its unique method for generating OTPs.
2. Sending the OTP: Once the OTP has been generated, it is sent to the user. This can happen through various channels, such as SMS, email or an authentication app. The important thing is that the OTP is sent to the user in a secure manner.
3. Using the OTP: The user subsequently enters the received OTP on the website or application they are trying to log into. This is usually done as part of a two-step verification process, where the user first enters their regular password and then the OTP.
4. Verification of the OTP: The website or application checks if the entered OTP matches the OTP originally generated. If the OTPs match, the user is granted access. If not, access is denied.
5. Expiry of the OTP: The key feature of an OTP is that it can only be used once. Once it has been used, or after a certain period has expired, the OTP becomes invalid and cannot be reused.

By following these steps, an OTP provides an extra layer of security that helps to protect access to sensitive information or systems.

Why use a one-time password?

Using a One-Time Password (OTP) offers several advantages, especially in terms of security. Here are some reasons why you might want to use an OTP:

• Increased security: OTPs provide an additional layer of security on top of traditional passwords. Because they can only be used once, they are much harder to intercept or steal than regular passwords. Even if an OTP is stolen, it becomes unusable once it has been used or after a certain period has expired.
• Protection against phishing: OTPs can help prevent phishing attacks. Phishing consists of cybercriminals trying to steal sensitive information such as usernames and passwords by pretending to be a trustworthy entity. Because an OTP becomes invalid after use, an attacker gains nothing, even if they manage to steal it.
• Ease of use: While using an OTP adds an extra step to the login process, it is generally simple and quick to use. Most people are accustomed to receiving OTPs via SMS or email, and entering an OTP is usually a straightforward and clear process.
• Compliance: In some cases, OTPs can help meet certain security standards or regulations. For example, the Payment Card Industry Data Security Standard (PCI DSS) requires two-factor authentication for certain transactions, which can be achieved using OTPs.

In short, using an OTP can significantly improve the security of your online accounts and protect you from various types of cyberattacks.

Proven and well-known technology

One-time codes are a tried-and-tested technology and standard security method for a variety of applications. Many users are therefore familiar with them, making an OTP solution easy to implement. In addition, the technology is standardised by the Initiative for Open Authentication (OATH). This means there are many different authentication devices and applications available, and they can be used for different systems simultaneously. This prevents the need for separate hardware or smartphone apps for each identity provider.

Suitable for many different applications

One-Time Passwords (OTPs) are used in various scenarios and industries to increase security and prevent unauthorised access. Here are some use cases for OTPs:

• Online banking: OTPs are often used in online banking for transactions and other sensitive operations. For example, when a user wants to make a transfer, the bank can send an OTP to the user’s registered mobile phone. The user must enter this OTP to confirm the transaction. This helps verify that the person conducting the transaction is the rightful owner of the account.
• Password reset: If a user forgets their password, an OTP can be used to verify their identity before they reset their password. The system generates an OTP and sends it to the user’s registered email or phone number. The user must enter this OTP to prove that they are the owner of the account.
• Two-step verification: Many online services, such as email providers, social media platforms and cloud storage services, use OTPs as part of a two-step verification process. In addition to entering their password, users must also enter an OTP that has been sent to their phone or email. This helps protect their account, even if their password is compromised.
• Access to sensitive information: In businesses and organisations, OTPs can be used to access sensitive information or systems. For example, an employee wanting to access a secured file or system might need an OTP to verify that they have permission to do so.

These use cases demonstrate how versatile and useful OTPs can be in different situations and industries.

OTP compared with other security methods

One-Time Passwords (OTPs) are a popular security method, but they are not the only option. Let’s take a look at how OTPs compare to other security methods:

OTP vs. static passwords: Static passwords are the most traditional form of authentication. Compared to static passwords, OTPs offer a higher level of security because they become invalid after use. This means that even if an OTP is intercepted, it cannot be used again to gain unauthorised access.

OTP vs. two-factor authentication (2FA): OTPs are often part of a two-factor authentication process, where the user must provide two different forms of identification. The other form can be something the user knows (like a password), something the user has (like a smartphone) or something the user is (like a fingerprint). Although 2FA offers an additional layer of security, it can also take more time and effort for the user.

OTP vs. biometric authentication: Biometric authentication, such as fingerprint or facial recognition, provides a high degree of security because it uses unique physical characteristics. However, biometric data cannot be changed once compromised, unlike an OTP which is changed or expires after use.

OTP vs. hardware tokens: Hardware tokens generate an OTP displayed on a physical device. While they provide a high level of security, they can be expensive to implement and maintain, and they can be lost or stolen.

Each security method has its own pros and cons, and the best choice depends on the specific needs and circumstances of the user or organisation. In many cases, using OTPs in combination with other security methods can be the best solution.

OTP ensures security

OTPs guarantee a high level of security. Combined with a personal device and possibly one or two other factors, they meet standards for strong login security such as two-factor and multi-factor authentication.

The code that arrives on a customer’s phone for an OTP does not come from an existing list and is also not saved for an extended period of time. Generation is done in the same way as creating the cryptographic keys that protect bank accounts. This unpredictability ensures there is no consistent pattern that a hacker can recognise and exploit.

Furthermore, one-time passwords are often only valid for a limited time (a few minutes to half an hour) and are intended for single-use only. This one-time nature applies even within the available time window. Once OTPs expire, they become completely useless, and even a hacker or cybercriminal cannot use them.

How do you implement OTPs in your organisation?

Implementing One-Time Passwords (OTPs) in your organisation can be an effective way to enhance the security of your systems and data. Here are some steps you can follow to do so:

1. Determine your needs: Before implementing OTPs, it is essential to assess your security requirements. What types of transactions or access do you want to secure? Who are the users and what are their needs and capabilities?

2. Choose an OTP method: There are several methods to generate OTPs, including HOTP, TOTP and OCRA. Each method has its own advantages and disadvantages, so it is crucial to select the one that best suits your needs.

3. Choose a delivery method: How do you wish to provide the OTPs to your users? This could be via SMS, email, an authentication app or a hardware token. The choice depends on factors such as your users’ technical abilities, costs and security requirements.

4. Implement the OTP system: This may involve installing and configuring software or hardware, integrating the OTP system with your existing systems and testing the system to ensure it functions correctly.

5. Train your users: It is important to train your users in using OTPs. This might involve explaining the importance of OTPs, demonstrating how to use them and providing support for any issues or questions.

6. Monitor and update the system: After implementation, it is vital to monitor the OTP system to identify and address any problems and update the system as necessary to meet changing security requirements.

Implementing OTPs can be a complex process, but with careful planning and execution, and with the help of solutions such as HelloID, it can be a valuable addition to your organisation’s security infrastructure.

One-time passwords in HelloID

HelloID offers advanced OTP integration as part of the HelloID Access Management module. The integration of one-time passwords in HelloID provides an additional layer of security and strengthens user authentication. HelloID makes it easy to implement OTPs, regardless of the technology used. In addition to its own HelloID Authenticator app, which features push-to-verify technology, HelloID also collaborates with commonly used and compatible OTP methods such as Microsoft Authenticator, Google Authenticator, OTP hardware tokens and YubiKeys. This ensures flexibility and freedom of choice for your organisation. Discover how HelloID can enhance the security of your authentication processes with one-time passwords..

The future of OTPs

One-Time Passwords (OTPs) have already had a significant impact on the world of cyber security, and it appears they will continue to play a crucial role in the future. Here are some trends and developments we can expect:

Increased adoption: As more organisations recognise the importance of robust security, it is likely we will see an increased adoption of OTPs. This is especially true for sectors dealing with sensitive information, such as finance, healthcare and government bodies.

Integration with other security methods: OTPs are often used as part of a two-step verification process, and we can expect them to be increasingly integrated with other security methods. This could range from biometric authentication to hardware tokens and beyond.

Improved delivery methods: While SMS and email are currently the most common delivery methods for OTPs, we can anticipate seeing enhanced and more secure methods in the future. This might include the use of encrypted messages or secure apps.

Advanced algorithms: The algorithms used to generate OTPs are constantly being improved to make them safer and more efficient. We can expect this trend to continue in the future, with even more advanced and robust algorithms.

In summary, the future of OTPs looks promising. With ongoing innovation and improvement, we can anticipate that OTPs will play an even more significant role in the world of cyber security.