How phasing out OTPs will transform digital banking?

The Central Bank of the UAE’s move could redefine digital trust, cut costs, and elevate the country’s status as a pioneer in secure, frictionless financial services, say analysts

- Issac John

The UAE banking sector is preparing for one of its most consequential technology shifts in decades.

The Central Bank of the UAE’s directive to phase out SMS and onetime passwords (OTPs) by March 2026 has been public for weeks, but its real implications are only beginning to sink in.

Far from being a minor compliance exercise, the change signals a decisive break with legacy security practices that have become increasingly vulnerable to fraud.

The question now is not what the CBUAE has mandated, but how banks, customers, and the wider financial ecosystem will adapt.

Analysts argue that the move could redefine digital trust, cut costs, and elevate the UAE's status as a pioneer in secure, frictionless financial services.

As institutions chart their implementation strategies, the transition away from OTPs is emerging as both a technological challenge and a strategic opportunity to reshape customer experience and resilience in the digital economy.

For years, SMS and OTPs served as the everyday security crutch of online banking. Familiar, convenient, but flawed, they have increasingly proven inadequate against phishing, SIM-swapping, and social engineering attacks.

By forcing the industry to move beyond these outdated tools, the central bank is pushing banks to adopt modern, phishing-resistant solutions such as passkeys and biometric authentication, aligning the UAE with global best practices in cybersecurity and financial innovation. Some in the banking sector may view the shift as another compliance burden — costly, disruptive, and complicated to implement. But forward-looking financial leaders see it differently. For them, this is a strategic inflection point, an opportunity to build a digital ecosystem that is far more secure while also being faster and simpler for consumers.