What Is the Meaning of OTP in Ecommerce?

If you recently started shopping online, you must have come across the term OTP and may wonder what it means.

A One-Time Password is a special code that is valid for only one login session or transaction on a computer or another device. It is useful for adding an extra layer of security. This is especially true in a case where traditional passwords may be at risk of theft or unauthorized access.

Keep reading to find out more about the OTP types and benefits, as well as its application in ecommerce.

Understanding OTP (One-Time Password) in Ecommerce Transactions

In ecommerce, OTP is a one-time password, a set of numbers or token codes that adds security to your purchase and delivery. It could be a set of numeric or alphanumeric characters that grants users access to a single transaction.

An OTP can be used during a 2-step authorization or as a standalone password. Nowadays, it is almost impossible to go online shopping without OTP in Nigeria. Let’s see more about OTP codes and find examples below to show how they work.

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One-time Password Examples

If you were to log in to your Google account on a new device, Google would request an OTP that starts with G- and the rest are numbers for verification, for example, G-22345. The same applies to some apps and e-commerce websites.

Another example would be if you are paying for an item online, you will need to provide your bank OTP. You will receive the code on your email or phone number.

The Importance of OTP Verification in Nigerian Ecommerce: Ensuring Secure Online Transactions

With cybercrime and theft on the rise, an online business must provide a strong OTP payment gateway. This way, it is difficult for scammers or hackers to bypass.

OTP is commonly used in 2-factor Authorisation (2FA). It’s a two-level security system where you input your password and receive an OTP code via email or phone number. 

This way, it is harder for fraudsters to purchase goods online with another person’s card or account details. In Nigeria, both international and domestic transactions require an OTP. 

This implies that IT administrators and ecommerce owners can stop worrying about password security problems. They don’t need to concern themselves with weak passwords and composition regulations (i.e., capital letters, alphabet, etc.) 

One common issue is that users tend to repeat the same passwords over multiple platforms. However, an OTP cannot be used more than once and expires within minutes or seconds. Thus, using an OTP helps reassure the user and streamlines the store’s business operations.

How To Generate OTP for Your Ecommerce Transactions: A Step-by-Step Guide

Platforms like Grey.co, for example, will always send you an OTP once you log in. This should also apply to new ecommerce stores. If you want to appear credible and safe in front of your users, adding OTPs is a good idea.

From login to purchase, here is how getting an OTP code works for users:

• Visit a site and log in with your email and password.

• The system will immediately request an OTP via SMS or email to your registered phone number. An OTP is usually time-bound (it can only be used within a period). Otherwise, it can be hash-bound, meaning you can only use it once.

• You have to enter the OTP to access the store. If the OTP is sent to your phone number and you cannot access the SIM, accessing the store or website will be tough.

• Once you are in and are done selecting the products you need, you will input your card details to make the payment. During this stage, you will need your bank OTP. It’s the payment gateway (i.e., remit, Quick Teller, or Paystack) that will request it.

• After providing the OTP, your purchase will be successful. It shows that you own the debit card and are authorized to purchase with it.

When an unauthorized user tries to perform the transaction with your card, they can’t complete the transaction. This is because they don’t have access to your Google account or SMS (Short Message Service).

Other methods of securing an e-commerce transaction include multifactor authentication and secure socket layer (SSL) certificates.

On the business end, you need to implement payment methods that require an OTP. Alternatively, if you’re using a SaaS solution that supports OTP, you can enable it from your ecommerce platform settings. 

OTP vs. PIN: Which Is Better for Ecommerce Transactions? 

A PIN (Personal Identification Number) is a numeric code similar to passwords but shorter. You can set a password to at least eight characters, but a PIN can only be set to 4 (sometimes 6) digits.

PINs can replace passwords. An ecommerce store or payment gateway may allow you to use a PIN (e.g., 3881, 4890) for a fast and secure checkout process. It is short and saves time. 

The good thing about PINs is they are hard to determine. However, some people use major events in their lives, like birthdays or anniversaries, as their PIN. This info can be easy to decode for hackers, so using such numbers is not advisable.

On the other hand, an OTP is generated by a computer, making it harder to determine. When it comes to security, an OTP may be the better choice. However, when we talk about a faster login, a PIN is better. Sometimes, you may have to input your ATM PIN and an OTP when shopping.

The Role of OTP in Mitigating Online Payment Frauds in Ecommerce

Recent reports show that multifactor authentication has blocked 99.9% of cyber attacks. Since OTP is one of the factors, it shows how important it is in lowering online payment fraud. After all, OTP codes are random and have no patterns, making them hard to decode or guess.

To add to that, most websites use SMS OTP codes, so you don’t need an internet connection to receive them. The OTP only arrives after you have input your password or bank code, making it harder to crack.

Common Issues With OTP Verification and How To Fix Them

Common issues when verifying OTPs include poor connection, memory troubles, and time-bound OTPs not sending until the time expires.

There are several ways to solve these problems, including the following ones:

• Check the Spam folder: If you’re waiting for an email OTP, you should immediately check your spam folder if you have not received it.

• Find a better connection: If you notice a poor connection, you should switch your airplane mode on and off or restart your smartphone. This is especially important in the case of a time-bound OTP.
• Clear your messaging app cache: Sometimes, you do not receive an SMS OTP because your phone memory or the cache is full. So, you have to clear the cache to resolve the issue.

These are the most common culprits for OTPs not functioning properly.

Different Types of OTP in Ecommerce

As you know, OTP in ecommerce is important for protecting online transactions. There are different types, and they all work to protect customer data and boost customer trust. 

This is especially important in Nigeria because of the low trust in doing business online. Let’s see the three types of OTP security in ecommerce:

SMS OTP

This is one of the most common and secure types of OTPs in Nigeria. It’s a case where a one-time code is sent to the buyer’s smartphone through a text message. 

If a Lagosian were to make payments for a skincare product online, they may receive an SMS OTP. This is to confirm that they are the ones paying for the goods. 

So, if a scammer uses another user’s details to buy goods online, they cannot complete the transaction. This is because they can’t access the user’s SIM card and see the text message. Thanks to such measures, customer data protection in e-commerce is better.

Email OTP

Email OTP is another common method used in two-factor authentication in ecommerce (2FA). Rather than receiving the one-time code as a text message, some customers prefer using their email. 

In this case, they will have to input their banking code before receiving a code in their email. Therefore, email OTP authentication involves both a regular password and a one-time code.

App-based OTP

App-based OTP is becoming popular in the country. It’s a scenario where an app will generate the OTP. For example, Google Authenticator or Authy can generate an OTP for buyers without a network or internet connection. 

Imagine a customer from Port Harcourt using an app to get an OTP to verify their online purchase. They don’t need their emails or numbers, although they would need them to set up the apps prior.

The Future of OTP in E-commerce: Opportunities and Challenges

The future of OTP in ecommerce looks promising as cybersecurity has become a priority and more and more businesses rely on additional layers of security. In this regard, OTP shines as a cost-effective and convenient security measure. 

We’ll likely continue to see steady interest in OTP solutions due to the following:

• A growing number of internet users; 
• Increasing ecommerce purchases; 
• Introduction of cloud-based OTP solutions;
• More mobile applications. 

On the other hand, the challenges include not having access to your SIM card or losing access to your email or device. These could result from misplacement, theft, poor connectivity, and full device memory.