Microsoft Goes Passwordless—5 Must-Know Impacts for MSPs

Microsoft recently announced a major step in digital identity security: new accounts will default to passwordless logins using passkeys. This change is part of an industry-wide shift toward eliminating passwords—and it comes with significant implications for Managed Service Providers (MSPs).

While the move to passkeys offers substantial security benefits, Microsoft’s implementation isn’t without friction. Users must install the Microsoft Authenticator app to fully remove passwords from their login flows. Nonetheless, the future of authentication is here, and MSPs must be ready to guide clients through the transition.

Here are five must-know impacts for MSPs:

1. Passwords Are Becoming Obsolete

Passkeys are designed to replace passwords entirely. They rely on cryptographic key pairs that bind credentials to devices and websites, making them far more secure than shared secrets. MSPs should begin auditing client systems to phase out traditional passwords and prioritize environments that support FIDO2/WebAuthn.

2. Passkeys Reduce Phishing and Credential Theft

Because the private key in a passkey never leaves the user’s device and can’t be phished or reused, many common attack vectors are eliminated. This is a major win for MSPs tasked with improving client security postures. Promoting phishing-resistant MFA like passkeys can significantly reduce incident response needs.

3. Microsoft Authenticator is a Required Dependency

Although Microsoft markets the move as “passwordless by default,” users must install Microsoft Authenticator to truly remove passwords. Competing authenticators like Authy or Google Authenticator aren’t supported. MSPs should be prepared to field questions about this limitation and help clients onboard to the Microsoft ecosystem smoothly.

4. Identity is the New Perimeter

As perimeter-based security becomes obsolete in the cloud era, identity is now the frontline defense. MSPs who integrate passwordless workflows into identity and access management strategies will offer more resilient security services and reduce their clients’ exposure to credential-based threats.

5. Prepare Clients for Transition Challenges

Passkey adoption can be clunky. Some systems aren’t fully compatible, users may resist installing new apps, and helpdesk tickets may spike during migration. MSPs should treat this as an opportunity to show leadership—by creating structured transition plans and setting realistic expectations.

Microsoft’s announcement signals a clear industry trend toward passwordless security. While implementation still has rough edges, MSPs who embrace and guide this transition will position themselves as proactive, trusted advisors. The future of secure authentication is device-bound, phishing-resistant, and user-friendly—but only if MSPs lead the way.