Why are SMS OTPs costly for enterprises?

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.

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.

Read the full article#