How should broker platforms replace OTP without breaking client access?

Why This Matters for Security Teams

Broker platforms cannot treat OTP as a harmless convenience layer. In practice, SMS or app-based OTP often becomes the weakest path in the whole identity flow, especially when it is still allowed for account recovery, device enrolment, or privilege reset. That creates a gap between the security promise of stronger login controls and the reality of how clients regain access after phone loss, SIM swap, or social engineering.

The broader identity problem is the same one NHI Mgmt Group documents in its Ultimate Guide to NHIs: 79% of organisations have experienced secrets leaks, and 80% of identity breaches involved compromised non-human identities such as service accounts and API keys. While that statistic is about NHIs, the operational lesson applies directly here. Any fallback path that is easier to abuse than the primary control will eventually become the real control. Industry guidance such as the OWASP Non-Human Identity Top 10 and NIST SP 800-53 Rev 5 Security and Privacy Controls both point toward stronger authentication, recovery hardening, and access lifecycle discipline rather than relying on a single shared factor.

In practice, many brokerages discover the real weakness only after a recovery abuse incident or a client takeover, rather than through intentional testing of their fallback paths.

How It Works in Practice

The safest replacement model is to make access depend on possession of a strong, phish-resistant factor plus a trusted device state, then apply the same standard to recovery. Passkeys are the best default for login because they bind authentication to a cryptographic credential on the client device, which is much harder to replay than OTP. From there, device binding should be used to recognise previously enrolled devices and to distinguish routine sign-ins from risky reauthentication events.

Recovery is where many broker platforms fail. If a user can create a new trusted device or reset access using only OTP, then the recovery path becomes a backdoor into the account. Stronger designs typically combine passkeys, verified device continuity, and step-up identity verification for higher-risk actions. For high-value accounts, some firms also add document verification, live support checks, or in-branch procedures, but current guidance suggests those should be reserved for exceptional cases, not the default path. The point is to ensure that recovery is at least as strong as enrolment.

Operationally, that means:

• Remove SMS OTP from any flow that can establish trust, including device registration and password reset.
• Use passkeys as the primary factor for login and transaction approval where client platforms support them.
• Bind sessions to known devices and evaluate risk when device, geography, or behaviour changes.
• Require stronger identity verification before adding a new device or restoring access.
• Track fallback usage as an exception metric, not a steady-state access pattern.

This aligns with the pattern described in NHI Mgmt Group’s Ultimate Guide to NHIs -- Key Challenges and Risks, where over-permissive identity paths and weak lifecycle controls expand exposure. The same logic appears in the 52 NHI Breaches Analysis: once a lower-trust path exists, attackers look for the easiest way to reach it. These controls tend to break down in legacy broker stacks that still depend on call-centre assisted resets and heterogeneous client apps because the recovery journey cannot be enforced consistently across channels.

Common Variations and Edge Cases

Tighter recovery controls often increase support overhead, requiring organisations to balance client convenience against fraud resistance. That tradeoff is real in brokerage environments where clients expect fast access and high availability. Current guidance suggests treating this as a segmentation problem rather than a universal exception: retail accounts, high-net-worth accounts, and institutional accounts may need different recovery thresholds, but all of them should avoid OTP as a trust-creation mechanism.

There is no universal standard for this yet, but best practice is evolving toward layered recovery. For lower-risk clients, passkeys plus a backup device or verified email may be sufficient. For higher-risk or regulated workflows, recovery may need out-of-band verification, documented approval, or a second trusted factor. What should not vary is the rule that recovery must not be easier to exploit than login.

Broker platforms also need to account for device loss, shared devices, international travel, and accessibility constraints. Those edge cases are where rigid policies create support friction, so the practical answer is to predefine exceptional recovery paths with stronger review, not to keep OTP as an always-available escape hatch. The lesson from NHI governance is clear: if an exception can create a trusted state, it needs the same scrutiny as the primary access path.

Related resources from NHI Mgmt Group

• How should security teams phase out SMS OTP without breaking access?
• How should security teams run access reviews for non-human identities?
• How should security teams govern non-human identities that have persistent access?
• When do NHI access reviews create more value than a one-time cleanup?