Passwords have been part of business IT for decades, but Microsoft is moving towards a future where they are no longer the main way we prove who we are.
For organisations using Microsoft 365 and Microsoft Entra ID, that change is already under way.
Microsoft has started making passkeys the default authentication experience in Entra ID, while also encouraging organisations to move away from SMS, voice codes and other authentication methods that are easier to intercept or phish.
So, what does this mean for your business?
Is Microsoft Getting Rid of Passwords?
Not overnight.
Microsoft is progressively moving users towards passwordless authentication rather than suddenly disabling every Microsoft 365 password.
From 1 September 2026, Microsoft began rolling out passkeys as the default authentication experience within Microsoft Entra ID.
This means more employees may start seeing prompts to register a passkey when signing in or completing multi-factor authentication.
The important message is simple:
Microsoft wants organisations to rely less on passwords and more on stronger, phishing-resistant authentication.
What Is a Passkey?
A passkey is a secure digital credential that can replace a traditional password.
Instead of typing a password, a user may sign in using:
- Facial recognition
- A fingerprint
- A device PIN
- Microsoft Authenticator
- A physical security key
Passkeys use cryptography rather than a shared password, which makes them much harder to steal through a fake login page.
For an employee, signing in could be as simple as looking at their laptop’s camera or using their fingerprint.
Why Is Microsoft Moving Away from Passwords?
Passwords remain one of the biggest targets for cybercriminals.
Even a strong password can be compromised if an employee:
- Enters it into a phishing website
- Reuses it on another service
- Has it stolen by malware
- Stores or shares it insecurely
Passkeys help reduce this risk because there is no traditional password for an attacker to capture and reuse.
This is particularly important for Microsoft 365 accounts, which can provide access to email, Teams, SharePoint, OneDrive and other business data.
What Is Changing for Organisations?
Microsoft’s latest changes mainly affect organisations using Microsoft Entra ID.
Employees who currently use SMS or voice authentication may increasingly be encouraged to register passkeys.
Microsoft has also announced changes to SMS and voice authentication from 1 February 2027, as it moves organisations towards stronger authentication methods.
For businesses, this means now is a good time to review how employees currently sign in.
Does This Affect Microsoft 365?
Yes.
Microsoft Entra ID sits behind authentication for many Microsoft cloud services, including:
- Outlook
- Exchange Online
- Microsoft Teams
- SharePoint
- OneDrive
- Microsoft 365 applications
- Azure services
If your organisation relies on Microsoft 365, your authentication setup is an important part of your overall cybersecurity.
What Does Passwordless Mean for Employees?
For most employees, passwordless authentication should eventually make signing in easier.
Instead of remembering complex passwords, users may simply:
Open laptop → use Windows Hello → start working.
However, businesses should prepare employees before new prompts begin appearing.
Users should understand:
- What a passkey is
- Why Microsoft is asking them to register one
- Which device they should use
- What to do if they lose or replace a device
- Who to contact if they cannot sign in
Good communication will help avoid unnecessary confusion and support requests.
What Should Organisations Do Now?
Businesses using Microsoft 365 should start preparing rather than waiting for the changes to affect users.
Review Your Current Authentication
Identify how employees currently sign in.
Are they using passwords, SMS, Microsoft Authenticator, Windows Hello or passkeys?
Identify Users Relying on SMS
Businesses that still use SMS or voice authentication should review which users depend on these methods and consider stronger alternatives.
Review Microsoft Entra Settings
Check which authentication methods are enabled within your Microsoft 365 environment and whether your current policies are appropriate.
Start With a Small Pilot Group
Test passwordless authentication with a small number of users before rolling it out more widely.
Plan for Account Recovery
Consider what happens if an employee loses their phone, replaces their laptop or can no longer access their normal authentication method.
Communicate With Employees
Explain the change before Microsoft prompts start appearing.
Employees are far more likely to adopt passwordless authentication successfully if they understand why it is happening.
Do Businesses Still Need Password Managers?
Yes.
Microsoft may be moving towards passwordless authentication, but most organisations use plenty of systems outside Microsoft 365.
Accounting platforms, CRM systems, supplier portals, websites and other applications may still require passwords.
A business password manager such as Keeper can therefore remain an important part of your organisation’s security strategy.
Passwordless Authentication Is a Cybersecurity Change
Moving away from passwords is not simply about making login screens easier to use.
A compromised Microsoft account could potentially give an attacker access to email, files, internal communications and connected business systems.
Stronger authentication can make account takeover significantly harder.
For many organisations, Microsoft’s passwordless push should therefore form part of a wider review of Microsoft 365 security.
How Sitesi Can Help
Sitesi can help organisations review their Microsoft 365 environment and prepare for Microsoft’s move towards passwordless authentication.
Our managed IT and Microsoft 365 services can help with:
- Microsoft 365 licensing
- User and account management
- Multi-factor authentication
- Microsoft Entra configuration
- Passkey readiness
- Microsoft Authenticator
- Windows device configuration
- Keeper Password Manager
- Cybersecurity
- Ongoing IT support
Rather than simply enabling a new authentication option, we can help make sure it works properly within your wider IT environment.
Is Your Business Ready for Microsoft’s Passwordless Future?
Microsoft is clearly moving away from traditional passwords and towards stronger authentication methods such as passkeys.
Businesses do not need to remove every password tomorrow, but they should start reviewing their existing Microsoft 365 authentication setup now.
A planned approach will make the transition easier for employees while improving the security of your organisation.
If your business uses Microsoft 365 and you are unsure how these changes will affect your users, speak to Sitesi. We can review your current setup and help prepare your organisation for a more secure, passwordless future.
Frequently Asked Questions
Microsoft is progressively reducing its reliance on passwords, but organisational Microsoft 365 passwords are not being disabled overnight.
A passkey is a secure digital credential that allows users to sign in using methods such as a fingerprint, facial recognition, device PIN or security key instead of a traditional password.
Passkeys are designed to resist common phishing and credential theft attacks because there is no traditional password for an attacker to capture and reuse.
Yes. Microsoft Entra ID manages authentication for many Microsoft 365 services, so organisations using Microsoft 365 should review their authentication setup.
Yes. Sitesi can help review your Microsoft 365 environment, authentication methods and security configuration and plan a suitable move towards passwordless authentication.