One-Time Password
Also called: OTP · Topic: Payment Systems and Digital Finance · NCERT: Class 7, Ch 8 "Banks and the Magic of Finance"
Meaning
A One-Time Password (OTP) is a unique, temporary code of numbers or letters. It is used to confirm a person's identity or to approve a transaction, and it works only once, usually for a short time. It adds a second factor of authentication, meaning a second proof of who you are. The OTP proves something you have (your phone), and your PIN or password proves something you know. A thief who knows only your password therefore cannot finish the payment.
Example
You buy a train ticket online with your debit card. After you enter the card details, your bank sends a 6-digit OTP by SMS to your registered mobile. The payment goes through only after you type it in. Fraudsters often try to trick people into sharing this OTP, so it must never be shared with anyone.
Don't confuse with
- PIN (Personal Identification Number): a fixed 4–6 digit code that you choose and use again and again, for example at an ATM. An OTP is created fresh for each transaction and then expires.