Transaction authentication is the process of verifying and authorizing individual financial transactions to confirm that they were initiated by the legitimate account holder. Transaction Authentication is a verification layer that prevents fraudulent transactions and account takeovers by using multi-factor authentication (MFA), biometric verification, one-time passwords (OTPs), and, in some institutions, risk-based authentication that adjusts these requirements based on the characteristics of the transaction.
Use case/ examples for transaction authentication
High-value transfer protection: Requiring an additional biometric verification or one-time password (OTP) confirmation before processing large fund transfers, to protect customers from unauthorized transactions or account takeovers.
Fraud prevention: Analyzing transactions in real time and applying risk-based authentication that triggers additional verification steps (step-up authentication) when transactions appear to deviate from the customer's usual activity.
Account change authorization: Confirming customer identity through the use of step-up authentication before allowing account modifications such as address changes or beneficiary updates.