OTP Authentication: Everything You Need to Know

What is OTP authentication?

One-Time Passwords, known as OTP codes, are temporary and unique codes that enhance security in digital access and transactions. Unlike a fixed password, a verification OTP code changes with each use and expires within minutes, preventing fraud from stolen or reused credentials.

In this regard, services like cloudOTP or compatel OTP offer automated systems to send the right OTP message in every context.

How does OTP authentication work?

When a user initiates a process that requires verification, the system generates a unique and temporary code linked to their account. That code is sent to the recipient — via SMS, email, or a mobile app like Authy — and is only active for a few minutes. When entering the verification OTP code into the validation form, the server confirms that it matches the generated one, that it has not expired, and that it has not been used before. If everything is correct, access or the requested operation is authorized.

Thus, even if someone intercepts the password, without the real-time OTP they cannot complete the action.

One-Time Password generation process

• A temporary code (for example, 6 digits or a time-based TOTP) is generated with limited validity.
• The server stores the code in an encrypted database and associates it with the action and the user.
• The code is sent to the user via the selected channel.
• The user enters the code into the platform during the validation phase.
• The system checks that it is correct, has not expired, and has not been used before.
• If valid, the requested action is authorized.

Common delivery methods

The most commonly used channels to send an OTP message combine accessibility and security. SMS OTP verification delivery remains the most popular, as it reaches almost any mobile phone. Mobile apps that generate TOTP codes (such as Google Authenticator, Microsoft Authenticator, or even cloudOTP solutions) work offline and avoid network-related risks. Finally, sending via email is useful when there is no access to an OTP-capable phone.

SMS

The OTP code is sent as a text message to the user’s mobile phone number. It is fast, requires no additional apps, and reaches almost any phone, although it may experience delays due to network congestion or poor coverage. Here, platforms like compatel OTP and cloudOTP can provide greater stability.

Mobile applications

TOTP services generate codes locally at fixed intervals. They do not depend on the mobile network, are more secure, and work well in offline environments. Solutions like cloudOTP or integrations with SMS OTP verification allow smooth, fast, and efficient management. In these settings, the mobile OTP becomes a key protection layer.

Emails

When there is no access to a cellphone or no smartphone available, sending the OTP via email is a useful alternative. The combination of email plus a verification OTP code remains effective, provided the email account is secure.

OTP password lifecycle

• Creation: Generation of the unique code.
• Transmission: Sending to the user.
• Reception: The user receives the code.
• Use: Entry into the platform.
• Validation: Code verification on the backend.
• Expiration or consumption: The code becomes invalid after use or once the time limit has passed.

Advantages of using OTP authentication

• Dynamic security: OTP authentication strengthens security with a dynamic layer — each code is unique and expires quickly, making it extremely difficult for an attacker to reuse leaked or intercepted credentials.
• Protection against phishing and brute-force attacks: By requiring the code in real time, the risk of phishing and automated brute-force attacks is reduced: without an active OTP, it is impossible to proceed with access or validation.
• Easy implementation: Thanks to specialized APIs, you only need to integrate a few endpoints for generation, sending, and verification, leveraging existing messaging infrastructure (SMS, email, or mobile apps), especially in flows where the mobile OTP is key to confirming the user’s identity.

Improved security over static passwords

Because they expire in minutes and are single-use, OTP codes reduce the risk of stolen credentials being reused. Even if an attacker steals the password, they would still need the active OTP message. In addition, validation can be easily integrated into systems with APIs like those from LabsMobile.

Reduced risk of phishing and brute-force attacks

Even if an attacker steals the static password, they will need the real-time OTP. In addition, services usually limit validation attempts.

Ease of implementation in existing systems

With specialized APIs (for example, the SMS API or the LabsMobile OTP API), integrating generation, sending, resending, and validation of codes is fast and simple, with direct routes and high reliability worldwide.

Challenges and risks associated with OTP authentication

Although OTP authentication improves security, it also presents challenges. Delivery via SMS OTP verification can be affected by delays or SIM swap attacks. Platforms like compatel OTP or cloudOTP mitigate these risks. Codes can also be intercepted through malware or IMSI catchers. And the additional step can create friction if the OTP message is delayed or expires.

Vulnerabilities in SMS delivery

Dependence on mobile network coverage and quality; possible delays or message loss when the network is congested.

Risks of interception and spoofing

SIM swap, IMSI catchers, or SMS pharming can intercept or redirect OTP messages. In apps, malware on the device could also capture codes.

Limitations in user experience

The additional validation step adds friction to the flow, and time synchronization (in TOTP systems) or changing device/number can cause code rejections.

OTP authentication as part of the 2FA process (Two-Factor Authentication)

Incorporating OTP into a two-factor flow adds an extra layer of security: after entering the usual password, the user must validate their identity with a temporary code received on their mobile or app. This “second step” ensures that, even with compromised credentials, only the person with the authorized device can complete access.

Furthermore, by combining “something you know” (the password) with “something you have” (the OTP code), the system becomes much more resistant to fraud and unauthorized access.

Integrating OTP into two-step verification systems

OTP acts as the second factor after the static password (something you know + something you have). It is usually set up during registration or in the account’s “Security” section, linking a mobile number or generator app.

Comparison with other 2FA methods

• Hardware tokens (U2F, YubiKey): Very secure, require an additional physical device.
• Push notifications: Smoother experience but dependent on internet connection and specific apps.
• Biometrics: Simple for the user, though reliability depends on the sensor and raises privacy concerns.
• OTP (SMS/app/email): Good balance between accessibility and security; SMS is the most universal, while TOTP apps offer greater resistance to interception.