What is two factor authentication in a Demat account (2-FA)?

What is two factor authentication in a Demat account (2-FA)?

Two factor authentication in a Demat account is a security feature where a customer needs to meet two authentication criteria to get into the system. It's built on the following elements:

There is a knowledge factor (something that only the user knows) - for example, a password or PIN. Possession factor (something that only the user has)- for example, OTP, security tokens, smartphone authenticator apps, etc. The OTP will be sent both by email and SMS to clients on their registered email ID and mobile number. To understand more in detail about two factor authentication, read this article.

Cyber Security When You Open Demat Account

If you want to invest in stocks, a Demat account serves as a storage facility for your shares. It is also linked to a trading account, so you can buy and sell shares. To conduct trading transactions you need to approve four digit TPIN and both of these accounts are linked to a bank account, which allows seamless inflow and outflow of cash.

Due to the fact that all these accounts are linked, investors are naturally concerned about cybercrime. As a result, the National Stock Exchange (NSE) announced that two-factor authentication will become mandatory for Demat account access. This move has certain highlights that you should be aware of, especially if you want to be a part of the market today. 

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Table of Content

  1. Cyber Security When You Open Demat Account
  2. Features/Benefits of Two Factor Authentication in Demat account
  3. Why is 2FA Important For Demat Accounts?
  4. How To Enable Two Factor Authentication in Demat Account?

Features/Benefits of Two Factor Authentication in Demat account

Here are the features that are beneficial when you use two-factor authentication: 

  • Clients/investors can only access Demat accounts with two-factor authentication if biometric authentication is not possible. 
  • A two-factor authentication process involves a "knowledge-based factor," in which a user logs in using a password, user ID, security token, etc. The knowledge-based approach is characterized by the fact that it is unique to the user enabling it - something that only the holder of a Demat account knows and, therefore, provides an assurance of security in operations. 
  • The two-factor authentication method involves the use of two factors, such as a PIN or password and a "time-based one-time password" (TOTP). For added security, the TOTP will not be sent by SMS or e-mail but instead via a special app. Some examples of these apps are Google Authenticator, Authy, and Microsoft Authenticator. 
  • TOTP is time-bound for additional protection, only lasting 30 seconds. 

Why is 2FA Important For Demat Accounts?

Two factor authentication in the Demat account is primarily intended to secure customer authentication processes and to prevent unauthorized access to online customer accounts. When properly implemented, two-factor authentication provides greater protection against hacking than a single-factor password. Aside from that, these changes apply to everyone; otherwise, one will not be able to access their trading platforms.

How To Enable Two Factor Authentication in Demat Account?

Follow the below steps to enable two factor authentication in the Demat account:

Step 1: Visit the app or website you are using for your Demat account and then log in.

Step 2: Select Password and Security from your profile.

Step 3: Select the “Enable 2-Step TOTP” option.

Step 4: You will receive an OTP via your email address. Enter it.

Step 5: On your mobile phone, open one of your Authenticator apps

Step 6: When you reach the Add account screen, select 'scan a QR code' and click 'begin'

Step 7: Allow the app to access your phone's camera and scan the bar code displayed. TOTP (time-based one-time password) will be enabled for the account.

Trading in the share market today requires funds to be guarded at all times, enhancing the security of online Demat transactions. Thus, the NSE has now mandated two-factor authentication, i.e., dual authentication, instead of just a single authentication process to access Demat accounts. The two-factor authentication gives users some extra protection while trading, as well as encouraging them to invest.

FAQs on Two Factor Authentication in Demat Account

2FA is essential to web security since it immediately neutralizes the risks associated with compromised passwords. Hacking, guessing, or phishing passwords won't provide access to an intruder without approval from the second factor.

Users who are not enrolled in 2-Step Verification will not be able to sign in.

OTPs  (one-time passwords) are unique passwords that are only valid for a specified amount of time. The OTP  is an authentication method often used in two-factor authentication ( 2FA ) and multifactor authentication ( MFA ) that helps balance these needs.

A TOTP is a time-based one-time password. TOTPs are generated by TOTP apps that are already on phones, unlike traditional OTPs that are delivered via email or SMS. The TOTP is valid for only a short time (usually 30 seconds) and is regenerated every 30 seconds.