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.
