The UAE banking sector is preparing for one of its most consequential technology shifts in decades.
The Central Bank of the UAE’s directive to phase out SMS and one-time passwords (OTPs) by March 2026 has been public for weeks, but its real implications are only beginning to sink in.
Far from being a minor compliance exercise, the change signals a decisive break with legacy security practices that have become increasingly vulnerable to fraud.
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The question now is not what the CBUAE has mandated, but how banks, customers, and the wider financial ecosystem will adapt.
Analysts argue that the move could redefine digital trust, cut costs, and elevate the UAE’s status as a pioneer in secure, frictionless financial services.
As institutions chart their implementation strategies, the transition away from OTPs is emerging as both a technological challenge and a strategic opportunity to reshape customer experience and resilience in the digital economy.
For years, SMS and OTPs served as the everyday security crutch of online banking. Familiar, convenient, but flawed, they have increasingly proven inadequate against phishing, SIM-swapping, and social engineering attacks.
By forcing the industry to move beyond these outdated tools, the central bank is pushing banks to adopt modern, phishing-resistant solutions such as passkeys and biometric authentication, aligning the UAE with global best practices in cybersecurity and financial innovation.
Some in the banking sector may view the shift as another compliance burden — costly, disruptive, and complicated to implement. But forward-looking financial leaders see it differently. For them, this is a strategic inflection point, an opportunity to build a digital ecosystem that is far more secure while also being faster and simpler for consumers.
According to a digital security consultant who advises regional banks, the CBUAE move is not just a regulatory requirement; it is a leap into the future. “If done right, this transition can make digital banking in the UAE one of the safest and smoothest in the world.”
Analysts argue that the CBUAE’s move is a golden opportunity to build a financial system that is safer, smarter, and future-ready. For the millions of people who rely on UAE banks every day, this is the beginning of a passwordless era that promises security without compromise and convenience without friction.
The replacement for OTPs is already here, and it is quietly gaining ground: passkeys. Built on global FIDO standards, passkeys replace both passwords and OTPs with cryptographic keys stored on the user’s device. They work seamlessly with biometric features such as fingerprints or facial recognition already built into smartphones.
Instead of typing in a code, a customer can authenticate with a quick scan of their finger or face. The process is instant, secure, and effortless. Passkeys are inherently resistant to phishing. They are bound cryptographically to the bank’s app or website, meaning that even if a fraudster creates a fake website, the login simply won’t work. There is no password to steal, no code to intercept.
The most common attack vectors for fraud are eliminated at the source. For customers, this means peace of mind. For banks, it means reduced fraud losses and fewer costly disputes. The advantages do not end with security.
Passkeys also offer a vastly improved customer experience. No more waiting for SMS messages that sometimes never arrive due to network delays. No more repeated calls to customer service when OTPs expire or fail. A biometric login is quick, familiar, and frictionless.
Industry analysts point out that such ease of use encourages customers to adopt digital banking more readily, which in turn boosts loyalty in a highly competitive market.
Banks also stand to save money. The cost of sending millions of SMS messages every month is not insignificant. Password-related queries and resets clog up call centres and IT helpdesks. Moving to passwordless authentication could slash these costs and free up resources for innovation.
Beyond login security, the shift opens the door to a broader rethink of customer identity.
Experts say banks should approach this as a complete customer identity and access management journey rather than a narrow fix. From onboarding to high-value transactions, every interaction can be secured with biometric or risk-based authentication that adapts seamlessly to context. For example, a quick fingerprint might be sufficient to check an account balance, while a larger transaction could trigger a second biometric prompt or behavioural analysis running silently in the background.
Emerging technologies are already being piloted by UAE banks to stay ahead of fraudsters. Decentralised identity systems are giving customers more control over their personal data, limiting the risk of mass breaches. Behavioural biometrics, which analyse typing patterns, swipes, and device handling, add an invisible layer of continuous authentication.
Some institutions are testing post-quantum cryptography to future-proof their systems against the potential threat of quantum computers. Hardware keys and AI-powered deepfake detection are also being introduced for VIP and high-risk accounts. These measures demonstrate that banks are not only reacting to the CBUAE’s directive but also embracing the chance to lead globally in digital trust.
International best practice shows that the UAE is on the right track. In the United States and Europe, some of the largest banks have already rolled out passwordless authentication for millions of customers, reporting sharp declines in fraud attempts and improved satisfaction scores.
With the UAE’s reputation as a financial innovation hub, the CBUAE’s clear deadline ensures the country will be among the pioneers of a truly passwordless era.
Consumers, however, may feel apprehensive at first. The familiar OTP has been part of daily life for years. Banks will need to run awareness campaigns to reassure customers that biometric passkeys and other advanced methods are not only safer but also simpler.
Transparency, education, and gradual rollout will be critical to building trust. “The key is communication,” said a senior executive at a leading UAE bank.
“We have to explain to customers that what feels like a big change is actually a win-win: stronger protection and less hassle.” The countdown to March 2026 is already under way. Institutions that embrace the change early will set the standard for digital banking security in the region. Those that lag may struggle to win back customer confidence.
For consumers, the message is simple: the next time you access your account, you may no longer receive that familiar text message. Instead, your face, your finger, or your device itself will be your key.
Explainer: What this means for bank customers
If you’re used to receiving a one-time password (OTP) by SMS every time you log in to your bank account or approve a payment, things are about to change. By March 2026, UAE banks will no longer send you those text codes. Instead, you’ll be asked to verify yourself in smarter, safer ways.
The most common replacement will be biometric logins, like using your fingerprint, face scan, or the security features already built into your smartphone. This is called a passkey, and it means no more typing in long codes or waiting for SMS messages that sometimes arrive late — or not at all. You’ll simply tap your finger or look at your screen, and you’re in.
For customers, this has several advantages. It’s faster and easier than SMS. It’s also far more secure because hackers can’t trick you into giving away a passkey the way they can with an OTP. The system is designed so your biometric data never leaves your device, keeping your privacy intact.
You may also see banks introducing extra invisible protections, like monitoring unusual behaviour in your account, or asking for a second biometric check when you make very large transactions.
In short, while it might feel strange at first to let go of OTPs, this move means less hassle, fewer risks, and a smoother banking experience. The next time you log in, your face or finger will quite literally be your password.
www.khaleejtimes.com (Article Sourced Website)
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