What Is an OTP Code? How One-Time Passwords Work (2026)

What Is an OTP Code? How One-Time Passwords Work (2026)

An OTP code (one-time password or one-time passcode) is an autogenerated code that's valid for a single login session. Users receive the code via SMS, email, or authenticator app and enter it to verify their identity during login or sensitive transactions.

OTP codes are a form of two-factor authentication (2FA) that adds an extra security layer beyond traditional passwords. Even if someone steals your password, they can't access your account without the OTP code sent to your phone or email.

Time-sensitive and single-use, OTP codes protect against fraud and data breaches better than static passwords alone. Banks, healthcare providers, and government websites use them to secure customer accounts and prevent unauthorized access.

Below, we'll explain how OTP codes work, the difference between HOTP and TOTP, and why businesses rely on one-time passwords to reduce cybercrime.

What does OTP mean?

What is an OTP and what does it mean? Simply put, a one-time passcode (or one-time password—we’ll use these terms interchangeably) is an autogenerated code that’s good for a single login and used to verify the user’s identity. Customers receive this token by email or SMS and enter it into the login form to access their accounts.

Time-sensitive, single-use OTPs replace static passwords to provide greater protection from fraud and data leaks. So if you want top-notch protection, consider OTP to offer customers peace of mind from bad actors accessing their accounts easily and reaffirm your organization’s reputation for security.

How do I get a one-time passcode?

End users will find it’s simple to get and use an OTP code:

1. The customer attempts to log into an account using the typical username and password.

2. The customer receives an offer to further verify the account with an OTP if the account doesn’t recognize the device or wishes to further protect the user’s information.

3. The customer chooses whether they receive the code by email, text, or phone call.

4. The customer receives the OTP code within seconds.

5. The user must then enter this code correctly—and in a timely manner—to gain access to the account.

From the business side, it’s somewhat more complicated to set up OTP. First, you’ll need an API that enables your application to generate and verify a passcode. Then, to enable OTP verification, you’ll sign into your Console to get your account string identifier and authentication token. From there, you’ll create the new verification service, enable geographic permissions, and configure your API build.

Take a look at these step-by-step instructions for more details.

How do one-time passwords work?

Applications generate one-time passcodes when clients request access. But what is OTP doing when an application generates a new code? It depends on what kind of OTP you use: the hash-based one-time password (HOTP) or the time-based one-time password (TOTP). The difference between them helps illuminate the inner workings of one-time passwords.

HOTP vs. TOTP

HOTP is an older authentication method that generates passcodes based on an incremental event counter based on validations. While HOTP gives users flexibility on when they use their code, it also leaves more time for hackers to potentially infiltrate the system and increases the risk of sync issues.

By contrast, TOTP generates an OTP based on a short interval of time (30–120 seconds). With a code based on time, there’s less chance for potential bad actors to intercept the code. TOTP is also easy to implement as a software token accessed offline.

Additionally, research shows that TOTP is “more secure than other OTPs” like HOTP. However, some platforms may not support TOTP, and ultimately your choice will depend on what tools you have at your disposal. If you use Twilio, we recommend TOTP because many users will prefer it to other methods.

What can OTPs be used for?

One-time passcodes serve a useful purpose, verifying a user’s identity when they attempt to sign into an account. However, OTPs can also enhance security after login, like in the case of a wire transfer within an online banking portal.

Today, you’re likely to encounter OTP authentication whether you’re on a website hosted by the government, a healthcare provider, insurer, financial institution, or employer. OTPs can authenticate a new user or device, complete a big purchase or money transfer, or reset a password.

Benefits of OTP codes

In general, 2FA enhances account security, and OTP is no exception to the rule. Consider how OTP benefits you and your users:

1. Improve account security

The most obvious benefit of one-time passcode for 2FA authentication is to improve the security of your customer accounts. Unlike a customer’s personal password, a one-time passcode is never the same between login attempts.

To access the account, a hacker would also need to have control of the target’s phone or email account. While hackers can still phish or steal one-time passwords for authentication, it’s less likely, as they’re more likely to choose easy target systems that offer larger windows of opportunity. Simply put, hackers take the path of least resistance.

2. Reduce fraud and cybercrime

Stolen credentials are one of the main avenues hackers access sensitive data, so when you incorporate 2FA and use one-time passwords, you help prevent fraudulent activity. Beyond an individual’s account security, OTPS also enhance the security of your systems as a whole by restricting access to legitimate users. Top authorities in the field have said that 2FA can reduce cybercrime attacks by up to 80–90%.

3. Simplify the customer journey

Using a one-time passcode is simpler than many other forms of 2FA. All users need is access to their email or phone. Then, unlike with ATMs or business hardware authenticators, users can verify their identities using software-generated OTPs rather than costly or complex software. They can also avoid the frustration of an account lockout due to suspicious activity. This is more convenient for users and helps reduce friction.

Build your OTP code experience with Twilio Verify

Ready to enhance your account security with one-time passcodes? With the Twilio Verify API, you can deploy an OTP through SMS, WhatsApp, voice, or email easily.

If you’re already familiar with the Twilio product line, you might recognize Verify as the next-level evolution of the Authy API but with additional features like helper libraries in several languages and improved visibility and insights. Learn more about how to build a one-time passcode experience with Twilio and try it for free.

Frequently asked questions

What does OTP stand for?

OTP stands for "one-time password" or "one-time passcode." Both terms refer to the same thing: a temporary code used to verify your identity during login or transactions.

What is an OTP code used for?

OTP codes verify user identity during login, password resets, financial transactions, and other sensitive actions. Banks use them to authorize wire transfers. Websites use them to confirm new device logins. Healthcare providers use them to protect patient data access. Any situation requiring extra security can benefit from OTP codes.

How do I get an OTP code?

You'll receive an OTP code via SMS text message, email, voice call, or through an authenticator app on your phone. The method depends on what the service supports and what you've set up in your account settings. Most services send codes within seconds of your request.

How long is an OTP code valid?

TOTP codes typically expire in 30 to 120 seconds. HOTP codes remain valid until you use them or the service invalidates them. Most modern services use TOTP with short expiration windows for better security.

Can someone steal my OTP code?

Yes, but it's difficult. Hackers can use phishing attacks or SIM swapping to intercept OTP codes, but these attacks require significantly more effort than stealing a static password. The short validity window of TOTP codes makes interception even harder. Using OTP codes still reduces your risk of account compromise by 80-90% compared to passwords alone.

What's the difference between an OTP and 2FA?

OTP is a type of 2FA (two-factor authentication). 2FA is the broader concept of requiring two verification methods to access an account. OTP codes are one specific method of implementing 2FA. Other 2FA methods include biometrics, hardware tokens, and authenticator apps.