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:
- Assign each customer a secure, unique identifier during onboarding.
- During payment initiation, our SDK generates and displays a fresh TOTP directly in your mobile app—no external delivery needed.
- 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
