For a long time, one-time passcodes felt like a smart upgrade.
Password plus a code texted to your phone? That sounded secure. Better than just a password, right?
But here’s the problem: fraud has changed.
Today’s criminals are not sitting around trying to guess six-digit codes. They are calling, texting, spoofing, and phishing people into giving those codes away. And when that happens, the one-time passcode does exactly what it was designed to do: it lets the person in.
That is why businesses need to stop treating one-time passcodes as a strong fraud prevention strategy. They are better than nothing, but they are no longer good enough on their own.
Why one-time passcodes keep failing
Most businesses think the danger is a weak password.
That is part of it, sure. But more and more, the real danger is social engineering.
A fraudster sends a fake login alert.
They spoof your bank, your payroll provider, or your email platform.
They create a website that looks identical to the real one.
Your employee types in their password, then gets asked for the one-time code.
They enter it.
The fraudster uses it immediately.
Done.
The issue is not that the code did not work. The issue is that the code cannot tell the difference between your employee and the criminal standing right behind them in a fake digital disguise.
That is exactly why security experts are sounding the alarm. Recent reporting tied to a Recorded Future report says attackers are increasingly bypassing authentication by intercepting or tricking users into surrendering OTPs, often during live fraud campaigns. Coalition’s head of security engineering went even further, saying businesses should reconsider using OTP and pointing to FIDO as the strongest option.
The biggest weakness: shared secrets
Here’s the simple version.
A one-time passcode is still a shared secret.
If I know it, and the criminal knows it, the system usually cannot tell us apart.
That is the whole problem.
Fraudsters have gotten very good at stealing shared secrets in the moment. They do it through:
- fake login pages
- spoofed text messages
- SIM swapping
- help desk impersonation
- fake “security alerts”
- real-time phone scams
And for small businesses, this is not some big-company problem. Security experts quoted in the article said smaller organizations are absolutely getting hit because OTP attacks are low-hanging fruit.
So what should businesses use instead?
This is where a lot of business owners get stuck.
They think the answer must be some giant, expensive cybersecurity overhaul.
Not necessarily.
But it does mean moving toward authentication methods that are much harder to steal, replay, or fake.
1. Use phishing-resistant MFA
This is the gold standard.
Phishing-resistant multi-factor authentication, including FIDO security keys or passkeys, is far stronger than SMS passcodes because it is designed to verify the actual device and login context, not just a code that can be copied and reused. The article you shared specifically calls FIDO the best and strongest solution.
What does that mean in plain English?
It means the login is tied to something the attacker cannot easily steal through a phone call or fake website.
Examples include:
- passkeys
- hardware security keys
- device-based authentication
- authenticator methods that verify the real site, not just the code
If your business uses Microsoft 365, Google Workspace, payroll platforms, banking portals, accounting software, or password managers, start by checking whether passkeys or phishing-resistant MFA are available. In many cases, they already are.
2. Stop using SMS as your main second factor
A texted code feels easy because it is familiar.
Familiar does not mean secure.
SMS can be exposed through spoofing, SIM swaps, message interception, and human manipulation. Even the broader regulatory environment is starting to shift away from OTP-only approaches, with some markets moving toward device-based authentication, biometrics, or app-based tokens instead.
So if your systems still rely heavily on text-message codes, that is a red flag.
At minimum, move away from SMS where you can. Use stronger app-based or device-based options instead.
3. Layer in device trust
Here’s the question businesses should ask:
Do we know this login is coming from a trusted device?
That matters.
A strong fraud defense is not just “Did the user enter a code?”
It is also:
- Is this a known device?
- Is it in a normal location?
- Is this behavior typical?
- Is the browser session suspicious?
- Is something happening too fast or in a strange sequence?
This is where device-based authentication and risk-based login controls become powerful. They do not rely on one little code to do all the work.
4. Add biometrics where it makes sense
Biometrics are not perfect, but they are harder to phish than a text message.
Fingerprint and facial recognition tools, especially when tied to trusted devices, add friction for the fraudster without adding as much friction for the real user.
That matters because the best control is not always the fanciest one. It is the one your team will actually use consistently.
5. Protect the people, not just the login screen
Let’s be honest.
A lot of fraud prevention conversations are too technical.
But this is really a people problem.
If your team thinks, “I got the code, so it must be safe,” you have a training issue.
Your employees need to know:
- no legitimate vendor, bank, or software provider should ask them to read back a security code over the phone
- a code entered into a fake website is still a stolen code
- urgency is a fraud tool
- “verify first” should be standard operating procedure
Think about it like wire fraud controls.
You would never tell your accounting team, “If someone emails updated banking instructions, just process it fast because they knew the invoice number.”
So why would you trust a login just because someone typed in a six-digit code?
Same concept. Different doorway.
What this means for small and midsize businesses
If you are a small business owner, you may be thinking, “That sounds great, but we are not a bank.”
Exactly.
You are also probably not staffed like a bank.
You do not have a full security team.
You do not have unlimited time.
And that is exactly why weak controls are so dangerous.
Fraudsters love businesses that are busy, understaffed, and still relying on old-school security habits.
They do not need to beat Fort Knox.
They just need one employee to trust one fake message for thirty seconds.
A smarter approach going forward
If your business is still relying on one-time passcodes, here is the shift to make:
Do not ask, “Is OTP better than nothing?”
Ask, “Would this stop a smart fraudster in a real-world attack?”
That is the better question.
For most businesses, the practical next move looks like this:
- replace SMS codes wherever possible
- turn on passkeys or phishing-resistant MFA for critical systems
- require stronger controls for banking, payroll, email, and accounting platforms
- train employees never to share or enter codes after clicking links in messages
- add device-based and risk-based checks where available
Because fraud prevention is not about checking a box.
It is about making sure your controls still work in the world we actually live in now.
And right now, one-time passcodes are just too easy to work around.
Final thought
A one-time passcode sounds secure because it expires quickly.
But if a criminal can steal it and use it immediately, the expiration time does not save you.
Businesses need to move beyond codes that can be copied and toward authentication that can actually tell the difference between a legitimate user and a fraudster pretending to be one.
That is the real standard now.
And the sooner businesses accept that, the better chance they have of staying ahead of the next attack.
