Basic cyber security says that passwords should be encrypted and hashed, so that even the company storing them doesn’t know what the password is. (When you log in, the site performs the same encrypting and hashing steps and compares the results) Otherwise if they are hacked, the attackers get access to all the passwords.
I’ve noticed a few companies ask for specific characters of my password to prove who I am (eg enter the 2nd and 9th character)
Is there any secure way that this could be happening? Or are the companies storing my password in plain text?
It’s normally an additional password/code, so it’s probably stored in plaintext.
The random character selection is what makes it useful. Stops someone who just captured your details from logging straight in (probably).
2FA is superior in every way to it. Most have now switched to sending you a chip & pin card reader to generate OTPs.