Short answer: use an emailed, single-use reset link as the default for most SaaS login recovery, and add SMS OTP only where users may genuinely lack email access or the product already maintains verified phone numbers. Email is usually the simpler system because the login identifier, recovery destination, and support workflow can remain in one channel. SMS can shorten the interaction, but it adds phone-number lifecycle, message segmentation, regional consent, and delivery-state work. “Cheaper” depends on your traffic and failure rates, so model completed recoveries rather than message sends.
This is a recovery decision, not a notification preference. The goal is to return the right person to an account without turning a delayed message, an expired credential, or a recycled phone number into an account takeover or a support queue. I've worked around enough spam filtering, rate limiting, and OTP delivery gaps to treat the channel as one component of that system — never as the system itself.
What should a SaaS password recovery flow use: email API or SMS OTP?
Start with the account data you can already trust. If every user signs in with an email address and changing that address is a controlled operation, an email reset link creates the smaller data surface. The service generates a high-entropy, single-use token, stores only a protected representation of it, sends a link, and accepts that token once before a short expiry. The browser then moves the user into a password-change session.
