Online Payments and Multi-Factor Authentication – The New Frontier

The online payment system is a handy and practical environment for both businesses and natural persons. However, certain risks are always lurking behind the corner, with online criminals set to steal our payment records and our assets.

That’s why every responsible financial organization applies advanced security methods, such as multi-factor authentication (MFA).

This article explains MFA, highlighting its benefits for payers and payees.

Multi-Factor Authentication Defined

Multi-factor authentication in online transactions is an identity-verification procedure carried out when we conduct a digital payment.

It has the multi-factor prefix because the payer is obliged to provide at least two (but often) more identification factors to complete the transaction.

The first security-identity factor here is the user password.

The other factors can be something they’re aware of, i.e., a secret question, something they have, i.e., a temporary code or a token, or something inherent to them.

These additional layers reduce the chance of our identities being hacked and our personal data and financial assets being stolen.

A New Approach to Identity Management

Back in the days when the Web was young and less developed than today, single-factor authentication was enough. We used to enter our username and password to log into our online (bank) accounts.

But now we have billions of Internet users worldwide and their unique identities. This immense growth of digital users and services has led to an almost exponential number of cybersecurity threats. Imagine a tranquil open-air market with fresh products in a village and a bustling urban flea market, with innumerable hustlers.

This would be the right comparison of the Internet of yore and the Web of today.

Such changes increased the demand for penetration-proof authentication procedures, and that’s how MFA was born.

MFA Key Elements

Multi-factor authentication contains two or more of the following factors:

  • Something the payer possesses. A software token or a hardware device, such as mobiles, tablets, authentication devices, and payment cards.
  • Something the payer knows. A secret question, a password, or any other piece of information known only to the payer.
  • Payer’s biometric information. Face recognition, fingerprints, eyeball identification (iris) – each performed via a smartphone.

The most typical application of MFA for regular, natural persons is as follows:

  1. The payer logs into their e-banking account by entering their username and password.
  2. A message with a code is sent to their previously registered mobile phone number or additional email address (something the payer has).
  3. They enter the code into the e-banking page.

When making payments via mobile banking apps, the payer typically enters the PIN code they’ve determined before, when they were registering to the app and verifying their identification factors. At this stage, some banking apps allow users to opt for their biometric data, rather than a PIN code (or to apply both).

How Many MFA Types Are There?

MFA can be roughly divided into several main types, based on their nature, as follows:

Software Tokens

A relatively new current authentication method, software tokens have advanced payer’s security because all the stages are happening online.

When a payer tries to access their bank app or online account, they’re sent a one-time password, generated through a token-generated app. There’s no involvement of additional devices or codes, which additionally protects users from unauthorized intrusion.

These token-conveyed passwords last only for half a minute or so. If the transaction is not completed within that interval, the payer must require a new one-time pass.

TPP Intel: Tokenization has become a standard security-enhancing procedure of credit card payment processing. Data transferred from one party to the other in that process are additionally encrypted and invisible to potential interceptors. Learn more about this method in our article The ABCs of Credit Card Tokenization.


Text messages have been the most prevalent second factor in MFA for a decade now. From a technical point of view, implementing this security layer is simpler than the aforementioned tokens.

When a payer wants to make a payment, the banking system in question sends a text message with a temporary numerical code (4-6 figures) to their phone number – previously registered and verified within the banking system. (The payer receives the code onto the device they possess.)

Even though an innovative method in the 2000s and early 2010s, it’s gradually becoming obsolete. There have also been growing concerns in terms of security because someone can steal the phone in question and access the app stored on it during that login window.

Biometric Authentication

If you’ve seen the Minority Report movie from 2002, you must have seen Tom Cruise as a member of the PreCrime police, where everybody is identified through the iris scan (eyeballs).

Each of us has our specific biometric features, such as specific fingerprints, one-of-a-kind eyeballs, and facial appearance.

These elements are increasingly used as the second, third, or any other additional security features for payments.

As such data isn’t stored in any databases, but only on our devices – at least that’s the official story – they’re the new, safer frontier of personal data authentication.

Speaking of the new frontier, tech experts and finance enthusiasts keep working together on pushing the envelope. Hence, ID chips have already become a reality, but still haven’t gained wider popularity.

In 2022, BBC brought an interesting story about Patrick Paumen, who had a chip implanted under his skin and makes contactless payments with a simple scan of the left hand. Still in a pioneer stage, such possibilities will become more common in the near future.

Why Do You Need Multi-Factor Authentication

No matter if you’re a software-as-a-service company, a bank, or a provider of high-risk merchant accounts, your operations, are prone to human error. When we add external hacker attacks and data theft attempts, it becomes clear that MFA is a valuable asset, providing the following benefits:

  • Effective identity and access management. From payment organizations to companies that use MFA for their internal access needs, this method reduces the risk of unauthorized access and increases.
  • Asset and data theft prevention. The more factors a hacker must go by, the less they’re likely to succeed. Hence, MFA repels many perpetrators from making additional efforts to break in.
  • Innovative security layers. If we can compare MFA to a fruit, it would be onions: with each new layer, the center of the object – the payer’s data – is harder to get.

For these reasons, both users and payment organizations should embrace MFA, knowing they’ll be more secure than before.

User Experience Concerns

It is true that multi-factor authentication takes more time for consumers to log into their accounts and make payments. This is even more obvious if the payment organization includes more than two factors in the identity verification system.

However, knowing that personal data theft causes substantial financial loss to both individuals and companies is a warning that such a multi-level approach is simply a must.


The future will bring stricter requests and rules for secure identity verification. The global payment system is at the front of these upgrades and improvements due to a significant interest of data hijackers in this field.

ThePayPortal is here to guide you through these payment operations, from risk mitigation services to smooth payment procedures. Contact us and have your merchant account opened in the shortest time possible: