Waiting for OTP to make a card payment? Visa will now allow payment authentication via passkey

Tired of entering an OTP (one-time passcode) every time you use a credit card to make a payment digitally? It may soon be a relic of the past. Global payments giant Visa is going live with payments passkeys in India to authenticate transactions, a move that it says will not only speed up transactions but also make them more secure.

“OTP has had its fair share of limelight. But, if you think of the classic horses for courses theory, I think we need to go beyond that. You are not using OTP to unlock your phone. You are using your own biometric identity, whether its retina scan, face ID, or fingerprint. Authenticating payment transactions shouldn’t be different,” Ramakrishnan Gopalan, Head of Products for India and South Asia, told Business Today.

Passkeys will allow Visa card users to authenticate a financial transaction with their biometric identity or fingerprint, pattern or pin that the user has set on her smartphone. Visa Payment Passkey is now live in India with IDFC First Bank. 

It will also be available for select users of merchants such as Myntra, MakeMyTrip, Paytm, Reliance Digital, Tata Starbucks and EatSure, along with a network of fintech partners. 

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The Reserve Bank of India made two-factor authentication mandatory from April 1, whereby digital transactions would need to incorporate at least one of OTPs, passwords, passphrases, pin, fingerprint, or any other form of biometrics.

Why passkeys are touted to be better than OTPs? They simplify the checkout process while strengthening transaction security, delivering a secure, faster and more intuitive payment experience, says Visa.

Gopalan says that while OTPs were very easy to implement, it would be very difficult for somebody to spoof your face or fingerprint, hence making passkeys far safer. “On a relative scale, we are going from very low level of sophistication to an extremely high level,” he said.

While OTPs work well, they are also prone to frauds like phishing. Already, digital card transactions in India are tokenised. Essentially, your sensitive 16-digit card number is replaced by a random token. So, you don’t have to store your actual card details when you save a card online. Passkeys will add in additional layer of security. 

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UPI (unified payments interface), which is among the most commonly used digital payment methods in India, had also earlier introduced additional transaction authentication methods like on-device biometric authentication.

In the payment ecosystem, Visa has been among the largest players globally. But, in India, it is the homegrown UPI that dominates, with 757 million daily transactions in June. Visa is exploring the possibility of a low-cost point-of-sale device that will enable more merchants, especially small and medium ones, to start accepting card payments.

“Today, cost of the device that you have in the market, makes it prohibitive for the small and the medium merchants to use them. Our endeavour is to lower the cost of the device to one-fourth or one-fifth of its today's cost so, that the small and medium enterprise owners can also start accepting credit cards,” said Gopalan.

Visa is also exploring if the smartphone itself could be turned into a point-of-sale device for card payments, considering that most of the people today have smartphones and large proportion of them are NFC-enabled. People would only need to tap their cards or phones to the merchant’s phone for payments.

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One on the one hand, while it is looking to get more merchants in to accept card payments, on the other it is also looking at expanding the customer base, with offerings such as secured credit cards, which are essentially backed by fixed deposits, for the newly employed for those who may not be eligible for a standard unsecured card.  

“It’s a lot of market making work that we need to do over time. We are absolutely doing this with our partners; on the supply side find new use cases, find new segments, use your credit card as a springboard to bring more customers and on the demand side, get more merchants ready for card payments,” Gopalan said.