Enhancing Transactional Security in U.S. Banking Systems by Implementing OTP-Based Two-Factor Authentication to Mitigate Debit and Credit Card Fraud

Abstract

The rapid rise in debit and credit card fraud within the United States has become a significant threat to financial institutions and consumer trust. Despite the widespread use of encryption and secure socket layer (SSL) technologies, traditional single-factor authentication methods such as static passwords and Card Verification Value (CVV) codes remain susceptible to cyber threats, including phishing, data breaches, and credential stuffing. This paper proposes the implementation of One-Time Password (OTP)-based Two-Factor Authentication (2FA) as a scalable and effective mechanism to enhance the security of card-based transactions in the U.S. banking system. By combining a user-known credential with a dynamic, time-sensitive OTP, the study presents a robust authentication framework designed to reduce unauthorized access and transactional fraud. The discussion draws on a comprehensive review of current fraud trends, limitations of existing authentication models, and a conceptual OTP-integrated security architecture adaptable to banking infrastructures. The paper also considers technical feasibility, user experience implications, and regulatory compliance. Findings offer practical insights and implementation strategies to support U.S. financial institutions in mitigating fraud risks while maintaining accessibility and usability for consumers.