Finance glossary

What is 2FA? Explained

Bristol James
6 Min

Two-factor authentication (2FA) is a security measure that requires users to verify their identity with two separate authentication factors before accessing an online account.

Unlike the traditional approach of relying exclusively on a password, 2FA introduces an additional layer of protection.

Authentication factors, including the crucial authentication code, typically fall into one of three categories:

  1. Something known – such as a password, PIN, or security question.
  2. Something possessed – such as a physical security key, an authenticator app, or a one-time password (OTP) sent to a phone.
  3. Something inherent – these include biometric identifiers like a fingerprint, facial recognition, or voiceprint.

By combining two of these factors, 2FA significantly reduces the likelihood of unauthorized access. Even if a hacker steals a password, they still need the second factor to breach the account.

2FA’s importance to cybersecurity became evident in 2021 when Google made it mandatory for 150 million users. The move saw the number of compromised accounts drop by 50%.

Definition and Importance

Two-factor authentication (2FA) is a security process that requires two different authentication factors to verify a user’s identity. This method adds an extra layer of protection to the traditional username and password combination, making it significantly harder for unauthorized individuals to gain access to sensitive information. By requiring two forms of verification, 2FA ensures that only the user can access a system, network, or application, thereby reducing the risk of data breaches and protecting against various types of cyber attacks. In essence, two-factor authentication 2FA is crucial in safeguarding personal and organizational data from malicious actors.

How does two factor authentication work?

The 2FA process
The 2FA process (Source: Imperva)

Two-factor authentication is straightforward and typically follows these steps:

  1. Enter credentials: A username and password are entered for an online account.
  2. Verify the second factor: The system then prompts for a second authentication factor, such as a verification code from an authenticator app or a security key.
  3. Validation: Upon successful verification, the user is granted access to their account.

This extra step may seem inconvenient, but it’s a small price to pay for significantly enhanced security.

Authentication Factors

Authentication factors are the methods used to verify a user’s identity, and they fall into three main categories: something you know, something you have, and something you are.

  • Knowledge factors include passwords, PINs, and answers to security questions. These are pieces of information that only the user should know.
  • Possession factors involve physical devices such as smartphones, smart cards, and USB tokens. These are items that only the user should have in their possession.
  • Inherence factors are based on biometric data, such as fingerprints, facial recognition, and voice recognition. These are unique biological traits that only the user possesses.

Two-factor authentication requires the use of at least two of these factors to verify a user’s identity, thereby enhancing the security of the authentication process.

Key authentication methods in 2FA

There are several authentication methods that online platforms use to enable 2FA, and each method offers a different level of convenience and security.

Here’s a closer look at the most prevalent.

Authenticator Apps and push notifications

Apps like Google Authenticator and Authy generate time-sensitive, one-time passcodes on a mobile device that expire every 30 seconds.

To set up an authenticator app, a QR code linked to the online account is scanned before the app starts to generate login codes. Since these apps also work offline, they are extremely secure.

  • Example: The Google Authenticator app is highly popular due to its user-friendly interface and versatility.
  • Benefits: Offers robust security, operates without reliance on phone networks, and functions offline.

SMS verification

This method sends a one-time password (OTP) to a user’s phone via SMS. The user enters this code during login to verify their identity.

  • Example: When a user logs into their online bank account, they receive an SMS with a unique code to input.
  • Drawbacks: SMS verification is susceptible to SIM-swapping attacks, where hackers transfer a phone number to their device. Scammers contact an individual’s mobile phone carrier and request activation of a SIM card in their possession. Once activated, they may gain access to 2FA codes and other sensitive information.

Security keys

Security keys are physical USB or NFC devices that plug into a computer or connect via Bluetooth. These devices—such as YubiKey or Google’s Titan Key— authenticate users when inserted into the device.

  • Example: Instead of entering a second factor manually, a YubiKey is plugged in to complete the login process.
  • Benefits: Impossible to hack remotely since they require physical possession of the key. These devices are also an effective defense against phishing attacks, making it nearly impossible for attackers to gain unauthorized access without the physical key.

Biometric authentication

This method uses unique biological traits such as fingerprints, facial recognition, or voice patterns to verify identity. Many smartphones and some laptops support this method.

  • Example: A laptop equipped with a fingerprint scanner integrated into the power button, allowing only the owner to gain access.
  • Benefits: Offers convenience and speed, eliminating the need to remember passwords or codes.

Trusted devices

Specific devices can be designated as “trusted” so that 2FA prompts are bypassed. This method is often used in combination with other 2FA methods.

  • Example: Logging into a Google Account on a personal laptop and marking it as a trusted device.
  • Benefits: Reduces the inconvenience of constant 2FA requests.

Why 2FA is essential for online security

Cybersecurity experts agree that 2FA is one of the most effective ways to protect online accounts.

It delivers various benefits:

  • Reduced risk of account takeovers: Hackers may obtain a password via phishing, but without access to a second factor, they cannot progress any further. Using the same password across multiple accounts increases the risk of unauthorized access, but 2FA mitigates this risk by requiring an additional verification step.
  • Data breach mitigation: Companies that experience a data breach may expose user passwords, but 2FA prevents bad actors from infiltrating the system.
  • Compliance requirements: Many regulatory frameworks—such as Europe’s General Data Protection Regulation (GDPR) and the Payment Card Industry Data Security Standard (PCI-DSS)—require multi-factor authentication to protect user data.

Implementing 2FA

Implementing two-factor authentication involves several key steps, starting with choosing an appropriate authentication method. Organizations can select from various 2FA solutions, including SMS-based 2FA, token-based 2FA, and biometric-based 2FA. The chosen solution should meet the organization’s security needs and be user-friendly. Once a solution is selected, it must be configured to work with the existing systems and infrastructure. This may involve integrating the 2FA solution with authentication systems like Active Directory or LDAP. Proper implementation ensures that the authentication process is seamless and that users are granted access securely.

What is the difference between 2FA and MFA?

While 2FA requires two forms of user authentication, multi-factor authentication (MFA) requires two or more factors and provides an additional layer of security.

Another way to think of the relationship between 2FA and MFA is that the former is a type of the latter. In other words, all 2FA processes are a form of multi-factor authentication, but not all MFA involves just two factors.

Common 2FA mistakes and how to avoid them

To conclude, let’s explore some common 2FA mistakes and what employees can do to avoid them:

1.    Over-reliance on SMS – use authenticator apps or security keys instead of SMS because of its vulnerability to SIM-swapping.

2.    Failure to back up access codes or recover keys – if a device that contains these codes is lost or damaged, users may be locked out of accounts. Always save backup recovery codes in a secure location.

3.    Over-reliance on trusted devices – avoid using the same trusted device for multiple accounts. If the device is compromised, scammers have more scope to steal data and commit fraud.

4.    Over-reliance on a single 2FA method – if a 2FA method that relies on internet access fails, access to accounts may be lost. Incorporating security keys and authenticator apps is therefore crucial.

Key takeaways

  • Two-factor authentication (2FA) is a security process that requires users to verify their identity using two distinct authentication factors before accessing an online account or system.
  • Key authentication methods in 2FA include:
    • Authentication apps
    • SMS verification
    • Security keys
    • Biometric authentication
    • Trusted devices
  • Common mistakes with 2FA involve:
    • Over-reliance on SMS
    • Dependence on trusted devices
    • Relying on specific 2FA methods exclusively

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