Passkeys have been around for some time, but enterprise-wide adoption to this point has been slow for a number of reasons. But soon, many Microsoft customers won’t have a choice.

Starting September 1, Microsoft will roll out passkeys as the default authentication method in its cloud-based identity and access management (IAM) service Entra ID. And following a transition period, Microsoft-provided SMS and voice authentication will officially end on February 1, 2027.

With this move, Microsoft seems to be underlining the urgent need for a more secure authentication standard, as attackers up their game with AI.

This is an “important milestone,” because it moves passwordless authentication from an optional security enhancement to the expected standard, noted Ensar Seker, CISO at SOCRadar. “That shift is significant as attackers increasingly rely on AI to automate phishing campaigns, generate convincing login pages, and conduct large-scale credential theft.”

Microsoft’s six-month passkey roll-out

Passkeys require users to authenticate via a fingerprint, facial scan, or lock screen mechanism, rather than a password. They can be stored on physical USB keys (like YubiKey), or as digital credentials on computers, phones, or in cloud accounts.

This method, Microsoft contended, reduces reliance on phishable authentication tools like SMS and voice, and hardens protection against credential theft.

Passkeys “work better for users and worse for cyberattackers,” Nadim Abdo, Microsoft corporate VP for identity and network access engineering, wrote in a blog post.

Microsoft’s announced timeline for rolling out passkeys is relatively aggressive:

• September 1, 2026: All SMS or voice-enabled users will be “auto-enabled and nudged” to register a passkey upon multifactor authentication (MFA) sign-in.
• September 18, 2026: Pricing, commercial terms, and a list of supported telecom providers will be shared for scenarios that still require SMS or voice authentication due to regulation or technical or operational challenges.
• October 30, 2026: Enterprises still using SMS and voice must select and configure a supported telecom provider through the Microsoft Security Store. From then on, they will be responsible for any telecom-related costs.
• February 1, 2027: Microsoft-provided telecom delivery for SMS and voice authentication ends as a native Microsoft Entra capability.

After February 1, enterprises that require SMS or voice for MFA must register a passkey before sign-in. There will be no opt-out option.

It’s important to note that these dates apply to public cloud-hosted Entra ID. Support for other cloud environments will follow a separate timeline; additional guidance and dates are to come.

While SMS and voice have served their purpose well, Abdo said, bringing MFA to billions of users who otherwise would have had none, the threat environment has changed in “speed, scale, and sophistication,” necessitating this move to passkeys.

The benefits of passkeys

SOCRadar’s Seker pointed out that passkeys fundamentally change the attack surface because, unlike with passwords, there is no transmission of shared secrets that can be stolen by threat actors. Authentication requires possession of the user’s device, along with biometric verification or a PIN.

“Even highly convincing AI-generated phishing pages cannot simply trick users into handing over a passkey the way they can with passwords or one-time codes,” he said.

So why haven’t we seen widespread enterprise adoption? Identity ecosystems are “fragmented,” Seker noted, and many enterprises still rely on legacy applications that only support passwords. They also struggle with cross-platform compatibility, lifecycle management, recovery processes, shared accounts, and employee onboarding and offboarding.

Further, “until recently, many organizations viewed passkeys as a consumer technology rather than an enterprise identity strategy,” he said.

Microsoft’s move changes that equation, because Entra sits at the center of many organizations’ identity infrastructure, Seker noted. Default settings are typically the strongest drivers of security adoption, so when passwordless authentication becomes required rather than optional, organizations are far more likely to deploy it at scale.

Its biggest benefit would be a “dramatic reduction” in credential-based attacks, Seker said. He pointed out that most successful compromises still begin with stolen credentials obtained through phishing, infostealer malware, password reuse, or adversary-in-the-middle attacks. Passkeys “eliminate or significantly reduce” many of those attack paths, while reducing password fatigue and the help desk costs related to password resets.

In addition, rather than trying to continuously improve users’ ability to detect increasingly sophisticated phishing attempts, passkeys remove the credential from the equation altogether, Seker noted. “That represents a more sustainable long-term security strategy than relying solely on user awareness training.”

Still, passkeys are not a silver bullet, as they do not stop endpoint compromise, session token theft, malicious insiders, or attackers who already have control of a trusted device. Enterprises must complement passkeys with endpoint protection, continuous monitoring, conditional access policies, and identity threat detection, Seker advised.

How enterprises can prepare

To prepare for the shift to passkeys, Microsoft advised enterprises to review their authentication policy and identify the groups still using SMS or voice authentication. They should then select the best authentication method for user devices and workflows, and ensure all employees are given passkeys and security keys.

Entra ID supports both synced passkeys (those stored in platform credential managers like iCloud Keychain and Google Password Manager), and device-bound passkeys such as Microsoft Authenticator passkeys, Entra passkey on Windows, or FIDO2 security keys.

Seker advised enterprises to evaluate support for FIDO2 and passkeys across their identity infrastructure, and to develop clear enrollment and recovery procedures. They should also educate users on what’s changing, how passkeys work, and how they can complete registration. Further, Seker said, it’s important to establish secure device management practices and to continue enforcing least privilege, conditional access, and risk-based authentication policies throughout the transition.

Ultimately, he pointed out, the move is crucial. “Over the next several years, organizations that continue relying primarily on passwords will likely face higher operational risk as AI continues to lower the cost and increase the effectiveness of credential-based attacks,” he said.