RBI Releases Draft Framework on Alternative Authentication Mechanisms for Digital Transactions

Moneylife Digital Team 01 August 2024

Investor Interest

To broaden the range of authentication factors available to payment system operators (PSOs) and users, enhancing both security and convenience, Reserve Bank of India (RBI) released a draft framework on alternative authentication mechanisms in digital payment transactions.

Traditionally, SMS-based one-time passwords (OTPs) have been the predominant method for an additional factor of authentication (AFA) in the digital payments ecosystem. While effective, the rapid advancement of technology has made alternative authentication mechanisms viable, RBI says.

In the statement on developmental and regulatory policies on 8 February 2024, RBI announced its intention to explore new authentication methods.

RBI says the draft framework encourages the adoption of various authentication methods beyond SMS-based OTPs. These include biometric authentication (fingerprint, iris scan and facial recognition), behavioural biometrics, and hardware tokens. “Each method will be evaluated for its security robustness to ensure protection against fraud and unauthorised access.”

A key goal of the framework is to improve user convenience and accessibility by offering multiple authentication options, the central bank says. “This flexibility allows users to choose the method that best suits their needs, potentially increasing the adoption of digital payments. The framework also includes guidelines for PSOs to ensure compliance with regulatory standards and regular audits and assessments to maintain the integrity and security of the authentication mechanisms. Interoperability and standardisation across platforms and devices are also promoted to ensure a seamless user experience.”

RBI has invited stakeholders to review the draft framework and provide feedback.

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