In fact the system used by the major Dutch banks is audited rather
extensively. The OTP system is based on an external smartcard reader
and a smartcard application on the bank card. They have no physical
connection so the web interfcae will present you with a challenge and
you must use that challeng, your card and your pin to generate the
proper response. Then you have to type in this response.
It is a combination of:
- What you have (the card with the smartcard application)
- What you get (the challenge from the server)
- What you know (your pincode)