Adapting to RBI’s New Mandate: How M2P’s RBA Platform Enables Intelligent Payment Authentication

India’s digital payments are scaling at record speed ₹14 lakh crore in monthly transactions reshaping how consumers and businesses interact. This rapid adoption, while fueling convenience and growth, also brings rising risks: fraud losses touched ₹36,000 crore in FY24–25, with SMS OTPs proving increasingly vulnerable. To restore trust, RBI’s new rules respond to this threat with a comprehensive approach emphasizing robust, adaptable authentication to a stronger security benchmark for the future of digital transactions.

The Reserve Bank of India (RBI) has introduced a landmark directive: dynamic, two factor authentications for all digital payment transactions, effective April 1, 2026. The goal is to move beyond the ‘OTP-only’ mindset and build a smarter, more resilient security layer that protects users without derailing convenience.

Let’s dive into the new directives of RBI.

The New Framework: Balancing Security, Innovation, and Convenience

The RBI's new directions are a deliberate attempt to harmonize three crucial aspects of digital finance: robust security, agile innovation, and seamless customer convenience. India has long relied on two-factor authentication (2FA), primarily through the ubiquitous SMS-based One-Time Password (OTP).

The new framework strategically acknowledges this dependency while simultaneously expanding the definition of acceptable authentication methods, moving the payment industry toward more sophisticated and flexible solutions.

1. Authentication Diversity: Beyond the OTP

The guidelines officially sanction a diverse array of authentication factors, allowing financial institutions to move beyond legacy SMS-OTP and determine which factors best meet their operational and consumer needs. This expanded scope includes:

• Knowledge: Passwords, passphrases, and PINs.

• Possession: Card hardware or software tokens.

• Inherence: Fingerprints or any biometric method (whether device-native or using Aadhaar).

2. The Dynamic 2FA Mandate

While the fundamental requirement for authenticating every digital payment transaction with two or more distinct factors remains, the RBI has introduced a critical stipulation for non-card-present (CNP) transactions: At least one authentication factor must be dynamic, meaning it is unique to the transaction in question.

This creation of a Proof-of-Possession mechanism significantly enhances security potential, making it virtually impossible for fraudsters to reuse possession data from previous transactions.

3. Risk-Based Intelligence Takes Center Stage

One of the most transformative features of the new framework is the explicit encouragement of Risk-Based Authentication (RBA). Financial institutions now have the strategic ability to move beyond the minimum 2FA requirement when a higher-risk transaction is observed.

Issuers are encouraged to evaluate transactions against a sophisticated set of behavioral and contextual parameters, including:

• User behavior patterns and historical transaction profiles.

• Transaction location.

• Device-specific attributes and fingerprinting.

This risk-based approach ensures minimal friction for low-risk transactions (e.g., through familiar devices or locations), while automatically escalating high-risk attempts to trigger additional verification steps. The RBI has even suggested platforms like Digi Locker as a probable channel for the notification and verification of high-risk transactions.

4. Strengthening Cross-Border Transaction Security

Recognizing the specific vulnerabilities in the global digital payment ecosystem, the RBI has focused on securing international digital commerce. Card issuers must validate the Additional Factor of Authentication in non-recurring, cross-border Card-Not-Present (CNP) transactions whenever overseas merchants or acquirers request it.

Financial institutions have until October 1, 2026, to establish the necessary processes to address all cross-border CNP transactions. This includes registering Bank Identification Numbers (BINs) with card networks, a necessary step that balances the technical challenges of implementation with the imperative of maintaining seamless payment experiences for global customers.

The Need for Intelligent Solutions

With RBI setting the stage for smarter authentication, businesses need solutions that go beyond compliance, solutions that think, adapt, and protect in real time.

That’s where M2P’s Risk-Based Authentication Platform comes in.

Introducing M2P’s Risk-Based Authentication Platform

At M2P, our full-stack solution is designed for banks and financial institutions to go beyond compliance by enabling seamless, secure, and intelligent authentication experiences, starting with full adherence to RBI’s mandate across card-present, card-not-present (ACS/3DS), and non-card transactions. Our stack helps our partners to  

• Comply with RBI’s mandate across card-present, card-not-present (ACS/3DS), and non-card transactions.

• Orchestrate authentication flows based on transaction risk, user behavior, and device fingerprinting.

• Support all authentication modes—PIN, OTP, biometrics, and behavioral biometrics.

• Deliver consistent experiences across mobile, web, and backend channels

• Integrate easily via SDKs and APIs.

• Scale confidently with a transparent commercial model.

Why does M2P Stands Out?

• Proven expertise in adaptive authentication and risk-based decisioning.

• Support for multiple authentication modes across knowledge, possession, and inherence.

• Flexibility to define your authentication strategy.

• Consistent customer experience across channels.

• Transparent commercial model.

Looking Ahead

Leading banks and fintech businesses are partnering with us to not just meet regulatory deadlines but to go beyond compliance by delivering authentication solutions that are secure, seamless, and intelligent.

Want to future-proof your authentication strategy using RBA?

Schedule a demo with us.

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Source

1. https://www.angelone.in/news/economy/upi-dominates-digital-payments-hits-84-share-in-fy25

2. https://vajiramandravi.com/current-affairs/surge-in-bank-fraud-value-despite-decline-in-cases-rbi-data-for-fy25/#:~:text=According%20to%20the%20RBI's%20Annual,or%20better%20internal%20control%20measures

3. Reserve Bank of India : Latest News Headlines, Videos and Photo Galleries on Reserve Bank of India | Business Standard

4. RBI Sets New Digital Payments Authentication Rules, Ends OTP-only Era From April 2026 - BW Businessworld

5. RBI mandates stronger two-factor authentication in new guidelines | Finance News - Business Standard