How Attackers Are Circumventing Old Multi-Factor Authentication Methods
TLDR
Traditional multi-factor authentication (MFA) methods such as one-time passwords (OTPs) and SMS-based codes were once considered sufficient. But attackers have learned to intercept, replay, and socially engineer their way past them. As digital transactions grow faster and more valuable, legacy MFA is becoming a liability. The future belongs to biometric and passwordless solutions built on device-bound passkeys — where authentication is cryptographically linked to the user’s trusted device. Ideem’s Zero-Trust Secure Module (ZSM) and Passkeys+ empower financial institutions to move beyond outdated MFA, securing every login and transaction with verifiable device-level assurance.
The illusion of safety in legacy MFA
When MFA first became widespread, it dramatically improved security over simple passwords. OTPs sent by SMS or email were easy to deploy and simple for users to understand. But over the past decade, the same convenience that made OTPs popular has made them a target.
Attackers now routinely bypass MFA through social engineering, phishing kits, and malware that captures OTPs in real time. Some don’t need technical sophistication at all — they simply call victims, impersonate support staff, and convince them to share their codes.
Other techniques exploit the authentication flow itself:
- SIM-swap attacks reroute OTP messages to the attacker’s phone.
- Man-in-the-browser malware intercepts codes as users log in.
- Phishing proxies replicate login pages and forward OTPs to the real site.
- MFA fatigue attacks spam users with repeated push requests until they approve one out of frustration.
Each of these exploits takes advantage of MFA’s weakest point — the human element and the separation between the credential and the device.
Why OTPs are no longer enough
The original intent of MFA was simple: combine something you know (a password) with something you have (a phone) or something you are (biometrics). But OTPs and email links fail that second condition. They don’t actually prove possession of a secure device — only access to a network channel that can be compromised.
As regulators push toward stronger customer authentication, the definition of “something you have” is evolving. It now means a cryptographic credential bound to a physical device, not a text message or token that can be forwarded.
For banks, wallets, and fintech platforms, this evolution is critical. OTPs introduce latency, friction, and growing risk. They slow down checkout flows and increase drop-off rates, while offering only modest protection against today’s attack vectors.
The rise of MFA bypass kits
A new market has emerged around “MFA bypass kits” — pre-built tools that automate credential theft and OTP interception. These kits use real-time phishing relays to capture session cookies, enabling attackers to hijack authenticated sessions without ever needing the user’s password.
In one widely reported campaign, attackers used Telegram bots to intercept OTPs from major global banks. Elsewhere, open-source proxy frameworks have made it trivial to clone login portals that capture both credentials and codes.
The effect is the same everywhere: legacy MFA gives a false sense of security. Institutions believe they’ve checked the box for strong authentication, while in practice they’ve added only a small speed bump for organized fraud.
Why passwordless and biometric solutions are the next step
Passwordless authentication eliminates static credentials altogether. Instead of verifying something the user knows, it verifies something they have and something they are — typically a registered device and a biometric gesture such as a fingerprint or face scan.
When implemented correctly, passwordless systems remove the weakest link in MFA: external transmission of secrets. There’s no code to intercept, no text message to reroute, no link to click. Each authentication request generates a new cryptographic challenge that can only be signed by the private key stored securely on the user’s device.
This is the foundation of device-bound passkeys — credentials tied cryptographically to a user’s device rather than synced across cloud accounts. Because the private key never leaves the device, even a successful phishing attempt cannot reproduce it.
Device-bound passkeys: MFA evolved
Ideem’s Passkeys+ extends this concept further by embedding device binding directly into the authentication process. Every credential is linked deterministically to the user’s specific device and verified through Ideem’s Zero-Trust Secure Module (ZSM).
That means:
- A login or transaction can only be approved from a known, registered device.
- Credentials are resistant to replay, cloning, and cloud compromise.
- Institutions gain device-level traceability for every authentication event.
By combining cryptographic binding with biometric verification, Passkeys+ replaces the fragile chain of passwords, OTPs, and external channels with a secure, frictionless experience.
For users, authentication becomes nearly invisible — a fingerprint, a face scan, or a quick passkey confirmation. For financial institutions, it’s a deterministic signal that the person transacting is genuine and the device is trusted.
Why this matters for payments and fintech
As payments move to real-time systems, there’s no margin for authentication failure. A stolen OTP can drain an account in seconds. Device-bound authentication, on the other hand, makes every transaction self-verifying.
This matters across the industry:
- Banks and issuers can meet strong customer authentication requirements while reducing false declines.
- Wallets and BNPL providers can offer frictionless, secure logins that protect users from account takeovers.
- Gateways and processors can prevent fraud before it enters the transaction flow, cutting operational costs.
With device identity at the center, authentication becomes both safer and faster — no delays, no codes, no guesswork.
A readiness checklist for modern MFA
- Audit your authentication flows
Identify where OTPs, passwords, or shared secrets are still used. Measure failure rates and user drop-off at these steps. - Adopt device-bound passkeys
Replace OTP-based factors with cryptographic keys stored securely on user devices. Ensure passkeys are bound locally, not just synced through the cloud. - Integrate biometric verification
Use native device biometrics to confirm user presence for every sensitive action. - Deploy a Zero-Trust authentication module
Implement systems like Ideem’s ZSM to enforce device registration, credential lifecycle management, and ongoing device integrity checks. - Educate teams and users
Communicate the shift from legacy MFA to device-bound authentication as both a security and experience upgrade.
Looking ahead
The next era of authentication will be defined by trust that lives inside the device, not across the network. OTPs and SMS codes were never designed for a world of instant payments, phishing-as-a-service, or automated fraud scripts.
Device-bound passkeys mark the transition from reactive defense to proactive assurance. They remove the weakest links in legacy MFA, proving not only who the user is, but which device is acting on their behalf.
Ideem’s ZSM and Passkeys+ were built for this shift — combining deterministic device binding with passwordless authentication to make every digital transaction verifiable, seamless, and secure. The attackers have already evolved. It’s time authentication did too.
Sources
- CISA – Multi-Factor Authentication Fatigue and Bypass Techniques
https://www.cisa.gov/news-events/alerts/multi-factor-authentication-fatigue-and-bypass-techniques - Microsoft Security Blog – The Evolution of MFA Attacks and How to Defend Against Them
https://www.microsoft.com/en-us/security/blog/2024/04/23/the-evolution-of-mfa-attacks-and-how-to-defend-against-them/ - The Paypers – Why OTP-Based MFA Is Failing in Modern Payments
https://thepaypers.com/expert-opinion/why-otp-based-mfa-is-failing-in-modern-payments--1260882 - Finextra – The End of OTPs: Moving Toward Device-Bound Authentication
https://www.finextra.com/blogposting/25409/the-end-of-otps-moving-toward-device-bound-authentication
Ideem – Passkeys+ and Zero-Trust Secure Module for Next-Gen Authentication https://www.useideem.com/passkeys-plus