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Why are SMS OTPs costly for enterprises?

Learn why SMS one-time passcodes (OTPs) lead to high operational costs for enterprises and how passkeys offer a cost-effective alternative.

Vincent Delitz

Vincent

Created: January 8, 2025

Updated: August 13, 2025

why are sms otps costly for enterprises

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Learn how to implement passkeys as phishing-resistant MFA for large-scale consumer deployments and boost security as well as user convenience.

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Why Are SMS OTPs Costly for Enterprises?#

SMS one-time passwords / passcodes (OTPs) have been a popular method for multi-factor authentication (MFA), but they impose significant costs on enterprises. Here's why:

1. Per-Message Fees#

  • Every SMS OTP sent incurs a fee, which can accumulate rapidly for organizations with millions of users.
  • For businesses with international customer bases, cross-border SMS delivery is even more expensive due to higher carrier charges.

2. High Volume of SMS OTPs#

Large-scale consumer deployments require frequent SMS OTPs for account logins, sign-ups, and recovery, increasing the volume - and the cost.

3. Fraudulent SMS Requests (AIT)#

Attackers exploit vulnerabilities like artificially inflated traffic (AIT), generating fake OTP requests to drive up SMS costs maliciously.

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4. Operational Costs#

  • SMS OTP delivery failures lead to support tickets, requiring customer service intervention to resolve issues.
  • Addressing these failures adds to operational overhead and frustrates users.

5. User Preference Challenges#

Many users prefer SMS OTPs for convenience, making it difficult for organizations to transition to cheaper alternatives like authenticator apps without compromising UX.

How Passkeys Help Reduce Costs#

Passkeys eliminate the need for SMS OTPs entirely by relying on secure, phishing-resistant authentication mechanisms. By reducing dependency on SMS, enterprises can save up to 90% in OTP-related expenses while enhancing user experience.

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introducing passkeys large scale overview

Read the full article

Learn how to implement passkeys as phishing-resistant MFA for large-scale consumer deployments and boost security as well as user convenience.

Read the full article

Read by 5,000+ security leaders.

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