Protecting online banking – Part 3

My personal choice would be a OTP ( One Time Pad ) setup.

The setup should be fairly simple;

• Create a system to create random sets of 8 ( or more ) character pads, they should be random but careful to make it easy for users to separate 0 and O.  Maybe only upper and lower case with no numbers?
• These should not be guessable or form any sort of pattern, so maybe use a hashing function. Just don’t hash 1, 2, 3, 4.
• When creating the pad one copy is associated with the user and stored as part of the authentication system and the other is handed off.
• The system should know when a user is nearing the end of the current pad and prompt for the creation of the next.