Beyond OTPs: India’s Shift Toward a Unified, Future-Ready Digital Trust Layer
- Nilesh Dhande
- 7 hours ago
- 7 min read
Summary/TL;DR
India’s move beyond OTPs is not about selecting a new authentication method. It indicates at a deeper shift toward rebuilding digital trust at scale. The RBI mandate on OTP-less transactions, effective from 1st April 2026, signals a structural change in how banks must approach digital banking security features and authentication practices.
As digital banking becomes API-driven, real-time and ecosystem-based, fragmented security controls are no longer sufficient. What financial institutions need is a unified trust infrastructure - one that secures identity, access, APIs and transactions cohesively and remains resilient to future threats of quantum computing.
This article explores why OTP replacement alone is inadequate, how banks should rethink authentication as trust infrastructure and what leadership decisions CISOs and CTOs must make now to prepare for the next decade of digital finance.
Ready to Go Beyond OTP? Let’s Talk
Table of Contents
India’s Digital Trust Inflection Point
RBI Mandate on OTP-less Transactions: What It Really Means?
Internet Banking Security Features: Why the Old Model Is Breaking?
From Authentication to Trust Infrastructure
OTP Alternatives: Necessary but Not Sufficient
Why Unified Trust Matters for BFSI?
Indigenous Deep-Tech and Digital Sovereignty
Leadership Imperative for CISOs & CTOs
The Road Ahead for Indian Digital Banking
FAQs on OTP-less Authentication & RBI Mandate
1. India’s Digital Trust Inflection Point
India’s financial ecosystem is at its defining moment.
Digital transactions now run into tens of billions every month, powered by internet banking platforms, mobile apps, UPI rails and partner APIs. Banks today are no longer closed systems; they are digital ecosystems interacting with fintechs, merchants, regulators and customers in real time.
This scale has fundamentally changed the threat landscape.
In 2024 alone, India reported ₹22,845 crore in cyber-financial fraud losses, while the first five months of 2025 saw nearly ₹7,000 crore lost to online scams. These figures highlight a disturbing truth: as digital adoption accelerates, so does sophisticated identity-centric attacks.
In this environment, authentication practices for internet banking must evolve from static verification into dynamic trust-establishing process.
2. RBI Mandate on OTP-less Transactions: What It Really Means?
The RBI mandate on OTP-less transactions, scheduled for implementation by 2026, is often misunderstood as a directive to replace OTPs with another factor.
In reality, it is far more strategic.
The mandate reflects RBI’s recognition that:
OTP-centric security is increasingly vulnerable to phishing, SIM swap, malware, and social engineering
Reliance on telecom-based authentication is prone to systemic instability
For a safe digital banking multi-layered, adaptive and future-ready authentication is the need of the hour
With this mandate, RBI is nudging banks to explore stronger, risk-aware authentication models. It is looking at not just security but also at building a resilient ecosystem. And this makes banks to ask a pertinent question
How do we embed trust into the foundation of our digital infrastructure, not just into a login or transaction step?
3. Digital Banking Security Features: Why the Old Model Is Breaking?
Traditional digital banking security features were designed for an era which had fewer digital channels, limited API exposure, mostly human-driven interactions and predictable threat models.
However, with the evolving technology banks today are operating in a completely different environment. Now-a-days, banking is practically always in an on-mode, volumes are extremely high, operations are in API-first architectures and a lot of machine-to-machine communication. This is further amplified by extremely dynamic AI-assisted fraud ecosystem.
Now with these changes, two-factor authentication, that to in isolation (in silos) provides nothing more than friction and a false sense of security.
And this revelation has led security leaders to discover that more factors ≠ more trust.
4. From Authentication to Trust Infrastructure
Traditional authentication methods were adapting to the threats as and when they appeared as a result most of them across majority of the banks and financial institutions, were as an add-on feature like a login control, a compliance checkbox or a point solution.
But now, modern digital banking has evolved significantly and so have threats, therefore, authentication can no longer secure you if executed as an add-on; it has to be integrated into the trust infrastructure.
A trust infrastructure is an all-inclusive foundation for banks that operates consistently across all channels (retail, corporate, APIs, employees). It secures identities continuously, not just at login or transaction stages. It further protects transaction flows and service-to-service communications. What sets it apart and makes it stronger is its ability to evolve cryptographically over time.
This is a major shift which changes authentication from “Who are you?” to Can this interaction be trusted, right now, in this context and in the future?
5. OTP Alternatives: Necessary but Not Sufficient
Now that we have understood how authentication must shift, let’s discuss what are the alternatives for OTP-less authentication for banks. Some of the common ones include:
QR-based login for secure, seamless access
Push notification approvals for real-time confirmations
Authenticator apps (TOTP) that remove telecom dependency
Hardware security keys (FIDO2) for high-risk users
Each of the above alternatives can improve security - tactically.
However, at this point it is important to note that OTP alternatives are not enough without a unified trust layer.
When deployed independently, they end up creating security silos, increase operational complexities, fragment policy enforcement and complicate audits and compliance.
Without orchestration, banks are at a risk of replacing one fragile system with several disconnected ones.
6. Why Unified Trust Matters for BFSI?
A unified trust framework transforms authentication practices for digital banking in more ways than one. It enables:
Single identity model across users, devices, APIs, and services
Centralised policy fabric that adapts to risk dynamically
Consistent enforcement across legacy and modern systems
Unified audit and compliance visibility
Future-proof cryptographic upgrades, including PQC
This approach also reduces tool sprawl which enables security to scale with business growth and improves effectiveness of Risk Based Authentication.
Risk Based Authentication (RBA) is one of the critical layers of unified trust. It allows OTP-less authentication initiatives to work at their full potential. Rather than applying uniform authentication controls, risk-based authentication analyses contextual signals like device location, time of the activity, session anomalies, API interactions and transaction sensitivity.
These evaluations remove the static quality of OTP-less authentication making them fully dynamic. As a result, a bank can build a secure digital banking infrastructure that evolves with he emerging threats.
So, at this juncture, banks should step up their game and instead of reacting to threats, must focus on engineering trust proactively for a sustainable and scalable security future.
7. Indigenous Deep-Tech and Digital Sovereignty
Digital trust is fast becoming national infrastructure, and with-it sovereign cryptography is gaining strategic importance.
Indigenous security platforms reduce dependency on foreign cryptographic controls, align with Indian regulatory expectations and strengthen long-term national resilience.
Since 2016, Fortytwo Labs has focused on building indigenous, cryptographic trust systems, first for defence environments and later for BFSI. Highly complex defence deployments demand:
Zero tolerance for compromise
Continuous identity verification
Tamper-proof communication
These are the same principles that are now increasingly becoming relevant for internet banking and digital finance at scale.
8. Leadership Imperative for CISOs & CTOs
For CISOs and CTOs, the RBI mandate on OTP-less transactions is not merely a compliance event, it is a strategic inflection point.
To the digital architects of banks and financial institutions, this is an opportunity to:
Consolidate fragmented authentication systems
Modernise identity across retail, corporate, API, and partner channels
Improve customer experience while reducing fraud
Build long-term cryptographic resilience
So, for technology leaders, there are two choices:
Temporary patches that satisfy near-term audits, or
Architectural transformation that secures digital banking for the next decade
9. The Road Ahead for Indian Digital Banking
India has already demonstrated global leadership in digital payments through UPI. Today, deep integration of UPI has already become case studies for many countries that are now trying to emulate the same. Now, we again stand at a point where we be the flagbearer for the next frontier i.e. digital trust.
Therefore, OTP-less authentication for digital banking has huge strategic potentials like,
Reducing fraud and operational cost
Enabling higher transaction volumes
Strengthening regulatory confidence
And above all, Improving customer confidence
The RBI mandate of OTP-less transactions should therefore be seen as an opportunity to redefine how trust is built, measured and sustained in digital finance. This shift beyond OTPs is not about abandoning familiar tools, instead it is about re-architecting digital trust for a future defined by scale, speed and uncertainty.
For India’s BFSI sector, the institutions that treat authentication as infrastructure and not a feature, will define the next decade of secure digital banking.
________________________________________________________________________________
10. FAQs on OTP-Less Authentication & RBI Mandate
Will OTP-less authentication increase operational complexity?
No. When implemented via a unified identity platform, it simplifies operations by centralising policies, audits and cryptography.
Why is OTP replacement alone not enough?
Because authentication methods in isolation create silos. Without a unified trust layer, complexity and risk increase.
How does risk-based authentication improve security?
It adapts authentication requirements based on context, behaviour, and session risk; reducing friction while improving assurance.
Why is risk-based authentication important beyond regulatory compliance?
Risk based authentication enables institutions to continuously adapt security decisions to real-world risk, reducing fraud exposure while maintaining seamless customer experience at scale.
Can OTP-less solutions work in low-connectivity areas?
Yes. Offline authenticators and hardware-based credentials work without telecom dependency.
Why is post-quantum cryptography relevant today?
Attackers can harvest encrypted data today and decrypt it later. Quantum-safe systems protect long-term confidentiality.
Can better authentication improve business growth?
Yes. Secure, friction less access reduces drop-offs, increases trust, and enables scale.
How should banks evaluate partners for OTP-less authentication?
Banks should assess whether a partner provides a unified trust framework covering identity, risk-based authentication, API security and long-term cryptographic resilience, rather than isolated point solutions. Also evaluate their client history of delivering such services at scale.
Ready to Go Beyond OTPs? Let’s Talk.
The RBI mandate is more than compliance—it’s a chance to re-imagine trust in digital banking.
Book a 1:1 consultation with our cybersecurity experts to explore:
How to implement OTP-less authentication
Building a unified trust infrastructure
Future-proofing your security against emerging threats