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