Securing OTP-Based eKYC with FinaGuardAI

 

 

As financial services rapidly move toward fully digital onboarding, electronic Know Your Customer (eKYC) has become the backbone of customer acquisition. OTP-based verification remains one of the most widely used mechanisms because of its simplicity and speed. However, as fraud techniques evolve, OTP on its own is no longer sufficient to guarantee identity authenticity. Threats such as SIM-swap fraud, phishing, and social engineering have exposed critical gaps in OTP-only eKYC flows, making stronger, intelligence-driven verification essential.

 

 

The Growing Risk in OTP-Only Digital Onboarding

While OTP verification confirms possession of a mobile number, it does not prove that the person using the device is the legitimate customer. Fraudsters increasingly exploit this gap using stolen credentials, intercepted OTPs, or compromised SIM cards. As regulators and customers demand higher trust in digital journeys, financial institutions must move beyond single-factor authentication toward layered identity verification.

Muthoot Finance’s Need for Stronger Identity Assurance

Muthoot Finance, one of India’s most trusted NBFCs, identified the need to enhance its digital eKYC framework while expanding online services. The organization sought a solution that could prevent identity fraud without increasing customer friction or onboarding time. Maintaining regulatory compliance and operational efficiency was equally critical, making it essential to adopt a security layer that worked seamlessly within existing systems.

Introducing FinaGuardAI by Finahub

To meet these requirements, Finahub implemented FinaGuardAI, an AI-powered security solution designed to strengthen OTP-based eKYC with advanced face verification and liveliness detection. Rather than replacing OTP, FinaGuardAI enhances it by adding biometric intelligence, ensuring that the individual completing eKYC is physically present and genuinely who they claim to be.

How FinaGuardAI Enhances the eKYC Flow

In the upgraded eKYC journey, OTP verification remains the first step, validating device ownership and intent. This is followed by real-time face verification, where the customer captures a live selfie that is securely matched against authorized identity records. FinaGuardAI then applies liveliness detection to analyze facial movements, depth, and behavioral cues, confirming that the interaction is happening in real time and not through a spoofing attempt.

The Importance of Liveliness Detection in Fraud Prevention

Basic face matching can be fooled by photographs, recorded videos, or screen replays, making it insufficient in isolation. Liveliness detection addresses this weakness by distinguishing real human presence from artificial representations. By identifying subtle indicators such as micro-expressions and three-dimensional depth, FinaGuardAI effectively blocks attacks involving printed images, video injections, and AI-generated deepfakes, significantly raising the barrier for fraud.

Business Impact for Muthoot Finance

With FinaGuardAI in place, Muthoot Finance strengthened its digital onboarding security without compromising user experience. Fraud risk was reduced, manual intervention was minimized, and onboarding remained fast and seamless for genuine customers. The solution also supported regulatory compliance by ensuring high-assurance identity verification, enabling the organization to scale its digital offerings with confidence.

Why FinaGuardAI Is Built for Financial-Grade Security

FinaGuardAI is designed specifically for the demands of the financial sector. It is optimized for real-world operating conditions, integrates smoothly with existing OTP and eKYC platforms, and scales efficiently across high-volume onboarding environments. By combining accuracy, speed, and resilience against modern fraud techniques, it delivers bank-grade security with customer-friendly simplicity.

 

Conclusion: Moving Beyond OTP to Future-Ready eKYC

OTP will continue to play an important role in digital identity verification, but it can no longer stand alone. By combining OTP authentication with AI-driven face verification and liveliness detection, Finahub helped Muthoot Finance future-proof its eKYC process against evolving threats. FinaGuardAI goes beyond verifying credentials—it verifies real human presence, creating a stronger foundation of trust in digital financial services. Contact us at info@finahub.com or +91 484 2388285. Let's build a safer financial ecosystem together. 

 

 

 

 

Make Your Payments Compliant with RBI's New Guidelines Using TOTP with FinaGuard – A Simple Path to Secure Authentication

 

With the Reserve Bank of India's Authentication Mechanisms for Digital Payment Transactions Directions, 2025 now in force (effective April 1, 2026), every domestic digital payment transaction requires strong two-factor authentication (2FA). The RBI's mandate is clear: protect users from fraud, ensure at least one dynamic factor for payment transactions.

The good news? You can achieve full compliance quickly and elegantly by implementing app-based TOTP (Time-based One-Time Password) as your second factor. This approach meets the RBI's requirements head-on, delivers superior security over legacy methods, and provides a seamless user experience directly within your mobile app.

Understanding the RBI Mandate at a Glance

Key requirements include:

• Minimum two distinct factors from the classic categories: something you know (e.g., PIN/password), something you have (e.g., software token), something you are (e.g., biometrics).
• For non-card-present transactions (the bulk of digital payments), at least one factor must be dynamic—uniquely generated or proven for that specific transaction to prevent reuse or replay attacks.
• Factors must be robust: compromise of one should not weaken the other.
• Interoperability across devices and platforms.
• Risk-based enhancements for higher-risk scenarios.
• Full customer compensation for losses due to non-compliant authentication.

After April 1, 2026, non-compliance risks enforcement under the Payment and Settlement Systems Act, 2007, plus heightened liability for fraud losses.

Why TOTP Is the Ideal Way to Comply

TOTP leverages the industry-standard HMAC-based algorithm with time synchronization to generate short-lived codes (typically 6 digits, refreshing every 30 seconds). When delivered securely via your mobile app, it perfectly satisfies the RBI's dynamic-factor rule without introducing delivery vulnerabilities or added costs.

This method:

• Is inherently dynamic and transaction-unique.
• Qualifies as “something you have” (the app/token on the user's device).
• Pairs naturally with a static factor like PIN  for true 2FA.
• Keeps everything in-app—no external channels, no delays, no interception risks.

Our App-Based TOTP Solution – Your Fast Track to Compliance

We deliver a lightweight, SDK-integrated TOTP second-factor authentication module tailored for the Indian payments ecosystem and built to exceed RBI standards.

How it works in three simple steps:

1. Assign each customer a secure, unique identifier during onboarding.
2. During payment initiation, our SDK generates and displays a fresh TOTP directly in your mobile app—no external delivery needed.
3. The user enters the code; your backend validates it instantly against the unique ID and combines it with the primary factor (e.g., PIN) to authorize the transaction.

The result is a compliant Primary factor (e.g., PIN) + TOTP flow: the PIN as the static “something you know,” and the app-generated TOTP as the mandatory dynamic “something you have.” The entire process is fast, reliable, and fully contained within your branded app experience.

Business Benefits at a Glance

• Achieves full RBI compliance for transactions ahead of the deadline.
• Significantly lowers fraud risk through time-bound, app-bound codes.
• Eliminates delivery costs and dependencies.
• Boosts conversion with instant, frictionless authentication.
• Enables easy upgrades (biometric face auth).
• Delivers a clean, user-loved in-app journey.

Secure. Seamless. Compliant. FinaGuard – Powering Tomorrow's Payments Today

Achieving RBI Compliance: Implementing the Mandatory Dynamic Factor with FinaGuardAI OTP or TOTP Authenticator Integration

 

 

The regulatory landscape for digital payments is continuously evolving, placing a high emphasis on secure authentication. For banks and Non-Banking Financial Companies (NBFCs), meeting the stringent guidelines set by the Reserve Bank of India (RBI) is critical, particularly the mandate for two-factor authentication (2FA) which includes a mandatory dynamic factor

FinaGuardAI, a smart multifactor authentication solution, provides a compliant and highly flexible pathway to implement this crucial dynamic factor using established methods like OTP.

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The Regulatory Mandate for Dynamic Authentication

As per RBI directions regarding authentication mechanisms for digital payment transactions, all such transactions must be secured by at least two distinct factors of authentication. These factors fall into three categories: something the user has, something the user knows, or something the user is.

Crucially, these directions require that for digital payment transactions (excluding card-present transactions), at least one of these authentication factors must be dynamically created or proven. This means the proof of possession of that factor must be unique to the specific transaction. Traditional SMS-based One-Time Passwords (OTPs) are a widely adopted example of such a factor

FinaGuardAI: The Foundation for Multi-Factor Compliance

FinaGuardAI is designed as an all-in-one smart multifactor authentication solution.  While its core strength lies in advanced biometrics, specifically AI-powered face and gesture-based authentication ("What User Is"),  it supports a range of modalities necessary to meet the two-factor rule:

• Smart Face Authentication (What User Is): Utilizes face and gesture authentication, liveness detection (using eye blinks and hand gestures), and supports fake face detection to ensure authorized access.

• OTP Based Authentication (What User Knows): FinaGuardAI explicitly supports OTP-based authentication

• Other Factors((What User Has ): The system also supports Debit Card authentication

The power of FinaGuardAI lies in its ability to easily combine multiple authentication modalities to achieve RBI-mandated two-factor authentication.

Implementation Strategy: Deploying the Dynamic Factor (OTP)

OTP (One-Time Password) serves perfectly as the dynamic factor because it is unique to the transaction, fulfilling the fundamental requirement of the RBI mandate

Here is how FinaGuardAI enables the dynamic implementation of OTP:

1. Integrating OTP as the Dynamic Factor

FinaGuardAI allows institutions to configure their authentication flows, enabling the selection of two distinct factors. To implement the mandatory dynamic factor, the solution uses OTP as one of the credentials requested from the user.  A typical secure transaction flow could involve pairing a static factor with the dynamic OTP:

• Factor 1 (What User Is/Something Static): Smart Face Authentication (Biometric)

• Factor 2 (The Dynamic Factor/What User Knows): OTP Based Authentication or TOTP

The authentication flow can redirect the user to a screen where they must enter the 6-digit code sent to their registered email or phone, confirming the OTP factor.

2. Leveraging Dynamic Policy Changes

FinaGuardAI provides the flexibility to dynamically change authentication modalities based on transaction type or value. This is key to maintaining security without burdening the user experience unnecessarily:

• High-Risk Transactions (Dynamic Enforcement): For suspicious activity, high-value transfers (such as preventing 'Mule Account' fraud), or specific actions like loan sanctioning, FinaGuardAI can be triggered to enforce multi-factor authentication involving the dynamic OTP.

• Tailored Authentication: For example, a bank might use the highly secure "Smart Face Authentication" as Factor 1, and only introduce the OTP (dynamic factor) as Factor 2 when a high-value transaction is initiated, ensuring that security scales with risk

3. Ease of Integration

FinaGuardAI integrates easily with existing web and mobile banking applications using APIs and SDKs. This seamless integration allows institutions to deploy the dynamic OTP factor quickly across different operating environments (Web, Android, iOS)

By leveraging FinaGuardAI's core capabilities, financial institutions can fulfill the requirement for a robust and dynamic second factor, ensuring compliance while actively reducing fraud, saving significant financial losses (every fraudulent transaction costs 4.5x the transaction value on average), and enhancing employee and customer accountability

 

Schedule a live demo today and see how FinaGuard AI turns RBI compliance into a fraud-proof powerhouse. Contact us at info@finahub.com or +91 484 2388285. Let's build a safer financial ecosystem together. 

Navigating the New RBI Authentication Directions 2025: How FinaGuard AI Empowers Banks and NBFCs for Secure Digital Payments

In the ever-evolving landscape of digital finance, the Reserve Bank of India (RBI) has just dropped a game-changer. On September 25, 2025, the RBI issued the Reserve Bank of India (Authentication mechanisms for digital payment transactions) Directions, 2025 - a comprehensive set of guidelines aimed at fortifying India's digital payment ecosystem against fraud and cyber threats. As banks and Non-Banking Financial Companies (NBFCs) gear up for compliance by April 1, 2026, one thing is clear: traditional SMS-based OTPs alone won't cut it anymore. Enter FinaGuard AI, our cutting-edge, AI-powered multifactor authentication solution designed to seamlessly align with these new mandates while supercharging fraud prevention in loan processing and beyond.

If you're in banking or fintech, this blog is your roadmap to understanding the RBI's vision and how FinaGuard AI turns compliance into a competitive edge. Let's break it down.

The RBI's 2025 Directions: A Shift Toward Robust, Dynamic Authentication

The new directions, issued under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007, build on the existing two-factor authentication (2FA) norm but introduce flexibility and rigor to leverage technological advancements. Here's the essence:

Key Principles at a Glance

• Minimum Two Distinct Factors: All domestic digital payment transactions must use at least two factors—something you know (e.g., password or PIN), something you have (e.g., hardware token), or something you are (e.g., biometrics like fingerprint or facial recognition). Exemptions apply to low-risk scenarios, such as small-value contactless card transactions or recurring e-mandates (detailed in Annexure-1).

• At Least One Dynamic Factor: For non-card-present (CNP) transactions—like online payments—one factor must be dynamically generated or proven, ensuring it's unique to each transaction. This moves beyond static passwords to real-time validation.

• Robustness: Factors must be independent; compromising one shouldn't weaken the other. Issuers bear full responsibility for deployment integrity and must compensate customers for losses from non-compliance.

• Risk-Based Approach: Banks can layer behavioral analytics (e.g., location, device patterns) on top of 2FA for high-risk transactions, even exploring DigiLocker for confirmations.

• Interoperability and Open Access: Authentication services must be accessible across devices, OS, and apps, promoting a level playing field.

Why FinaGuard AI is Your Compliance Ally

At Finahub Technology Solutions, we've built FinaGuard AI to address exactly these pain points. Our solution harnesses advanced face and gesture-based authentication, delivering "something you are" as a core factor—fully compliant with RBI's biometric-friendly definitions.

How FinaGuard AI Maps to RBI Principles

RBI Principle	FinaGuard AI Alignment
Two Distinct Factors	Combines biometric (face/gestures) with knowledge-based (PIN) or possession-based (device token) options. Issuers can offer customer choice, as permitted.
Dynamic Factor	Real-time liveness detection via eye blinks or hand gestures (e.g., thumbs up) generates unique proofs per transaction—perfect for CNP scenarios.
Robustness	Independent layers: Fake face detection thwarts deepfakes and spoofs, ensuring one factor's breach doesn't cascade.
Risk-Based Enhancements	Integrates with behavioral analytics for contextual checks, plus scalability for high-volume environments.
Interoperability	SDKs and APIs plug into Android, iOS, web, and mobile banking apps - open access across channels.

With response times under 10 seconds and horizontal scalability, FinaGuard AI handles peak loads without a hitch, supporting everything from gold loan verifications to high-value disbursals.

The Bigger Picture: Beyond Compliance, Toward Innovation

The RBI's 2025 Directions aren't just regulatory hurdles; they're a call to action for smarter, safer fintech. As SMS-OTP reliance fades, biometrics like those in FinaGuard AI rise as the gold standard—reliable, inclusive, and scalable. We've already integrated Aadhaar-enabled services for seamless compliance, and our solution's privacy-first design adheres to Digital Personal Data Protection (DPDP) Act standards.

Ready to Secure Your Future?

Schedule a live demo today and see how FinaGuard AI turns RBI compliance into a fraud-proof powerhouse. Contact us at info@finahub.com or +91 484 2388285. Let's build a safer financial ecosystem together.

Finahub Technology Solutions: Empowering India's digital transformation with innovative, compliant tech.

How FinaGuardAI Could Have Prevented the Aditya Birla Capital Fraud

 

 

On June 9, 2025, Aditya Birla Capital Digital (ABCD) suffered a significant cyberattack, where a hacker bypassed security measures, sold digital gold from 436 customer accounts, and siphoned off ₹1.95 crore. Link to news here. The breach, which evaded One-Time Password (OTP) authentication, exposed vulnerabilities in the app’s security framework. FinaGuardAI, an advanced fraud prevention platform leveraging real-time face verification and deepfake detection, could have been a game-changer in preventing this incident. Here’s how.

FinaGuardAI’s core strength lies in its real-time face verification technology, which authenticates users by analyzing facial features during critical transactions like digital gold sales. Unlike OTPs, which can be intercepted through phishing, malware, or social engineering, FinaGuardAI requires live facial recognition, ensuring only the legitimate account holder can authorize transactions. In the ABCD breach, the hacker made unauthorized technical changes to sell gold and transfer funds. FinaGuardAI’s biometric authentication would have flagged any attempt to access accounts without real-time facial verification, halting the fraud before it began.

Moreover, FinaGuardAI’s advanced deepfake detection capabilities address the growing threat of AI-generated fraud. The platform uses 3D depth sensing and multi-angle face scans with anti-spoofing algorithms to distinguish live users from recorded videos or deepfake attempts. In the ABCD case, where OTPs were bypassed, it’s plausible the attacker exploited vulnerabilities like session hijacking or stolen credentials. FinaGuardAI’s ability to detect synthetic media—such as manipulated videos or images used to impersonate users—would have added a robust layer of protection, ensuring no unauthorized access went undetected.

FinaGuardAI also enhances security through continuous monitoring and adaptive authentication. By analyzing user behavior, such as login patterns or transaction anomalies, it can flag suspicious activities in real time. For instance, the rapid sale of digital gold across 436 accounts and transfers to multiple bank accounts would have triggered alerts, prompting additional verification steps. This proactive approach contrasts with static OTP systems, which failed to prevent the ABCD breach, and could have stopped the fraudster’s coordinated attack early.

The platform’s seamless integration with financial apps ensures a user-friendly experience while maintaining high security standards. Unlike traditional systems that may overburden users with complex processes, FinaGuardAI streamlines authentication without compromising safety. For ABCD customers, this would have meant secure transactions without the risk of unauthorized access, preserving trust in the platform.

Furthermore, FinaGuardAI’s compliance with regulatory standards, such as KYC requirements, aligns with India’s stringent financial regulations. By enforcing robust identity verification during account access and transactions, it mitigates risks like insider fraud or synthetic identity attacks, which may have contributed to the ABCD breach. The platform’s ability to reduce fraudulent transactions by up to 80% (as seen in similar deployments) could have saved Aditya Birla Capital from significant financial and reputational damage.

In conclusion, FinaGuardAI’s real-time face verification, deepfake detection, and adaptive monitoring could have thwarted the ABCD fraud by ensuring only verified users accessed accounts, detecting synthetic media, and flagging anomalous activities. As cyber threats evolve, platforms like FinaGuardAI are critical for safeguarding digital financial ecosystems, protecting customers, and maintaining trust in fintech innovations.

UIDAI’s KUA Solution Can Be Now Hosted On Government Community Cloud: A Leap for Secure Aadhaar eKYC

 

UIDAI’s KUA Solution Can Be Now Hosted On GCC (Government Community Cloud): A Leap For Secure Aadhaar eKYC

The Unique Identification Authority of India (UIDAI) has taken a significant step toward enhancing the security and efficiency of Aadhaar-based services by allowing KYC User Agency (KUA) solutions for Aadhaar eKYC to be hosted on Government Community Cloud (GCC) service providers. This move aligns with India’s push for digital transformation while prioritizing data security and compliance, marking a pivotal moment for organizations leveraging Aadhaar authentication.

FinaGuardAI as a Second Factor Authentication Mandated by RBI for Banks and NBFCs

 

The financial sector in India is undergoing a digital transformation, with banks and Non-Banking Financial Companies (NBFCs) embracing technology to enhance customer experience and streamline operations. However, this shift has also amplified the risk of cyber threats, including identity theft, phishing, and unauthorized access to accounts. Recognizing these vulnerabilities, the Reserve Bank of India (RBI) has increasingly emphasized the importance of robust security measures, particularly two-factor authentication (2FA), to safeguard the financial ecosystem. In this context, FinaGuardAI emerges as a cutting-edge biometric solution that banks and NBFCs can adopt as a second factor of authentication, aligning with RBI’s mandates and elevating security standards. This blog explores how FinaGuardAI can be implemented as a mandated 2FA solution, its benefits, and its potential to reshape financial security in India.