Every year since roughly 2018, the cybersecurity industry has declared that passwords are dying. Passkeys, biometrics, and FIDO2 hardware tokens would replace them. The promise was elegant: no more breached vaults, no more credential stuffing, no more sticky notes on monitors.
It has not happened. Not at scale, anyway.
A March 2026 report from HYPR, an identity security firm, found that 76 per cent of organisations still rely on legacy passwords as their primary authentication method. Only 43 per cent have deployed any form of passwordless authentication, and of those, the vast majority have rolled it out to less than half their workforce. Meanwhile, the 2025 Verizon Data Breach Investigations Report showed that stolen credentials were the initial access vector in 22 per cent of all breaches reviewed, and that a staggering 88 per cent of web application breaches involved compromised passwords.
The passwordless future is real. It is also years away from reaching most businesses. The question nobody seems to be asking is: what should companies do in the meantime?
The transition gap
The cybersecurity industry has a terminology problem. “Passwordless” suggests a binary state: you either use passwords or you do not. In practice, every organisation occupies a spectrum. A company might use passkeys for its primary SSO portal but still require traditional credentials for legacy applications, third-party tools, shared infrastructure accounts, and client-facing systems that do not support modern authentication protocols.
This creates what HYPR calls the “Age of Industrialisation” for identity security: the hard, unglamorous work of operationalising passwordless solutions across fragmented IT environments while keeping existing credential-based systems secure.
For small and mid-size businesses (SMBs), the challenge is more acute. Large enterprises can dedicate teams to multi-year identity transformation projects. They hire identity architects, run 18-month migration programmes, and negotiate enterprise licences with Okta or CyberArk. A 30-person marketing agency or a 200-person logistics firm cannot. They need their passwords managed properly right now, with a credible path toward stronger authentication as it becomes practical.
The transition gap is not a temporary inconvenience. Gartner’s research suggests that even among organisations actively investing in passwordless infrastructure, full deprecation of traditional passwords is unlikely before 2028 for most. Legacy applications, regulatory requirements for specific authentication methods, and the sheer complexity of migrating thousands of stored credentials mean passwords will coexist with newer authentication methods for years.
This coexistence is where most breaches happen. Not in the shiny new SSO portal, but in the forgotten shared spreadsheet of API keys, the legacy CRM that still accepts “password123“, and the contractor account that was never deprovisioned after the project ended.
The credential crisis in numbers
The urgency is not abstract. Verizon’s 2025 DBIR found that credential stuffing accounted for a median 19 per cent of all authentication attempts against SSO providers. Only three per cent of compromised passwords met basic complexity requirements. And in the median case, users shared 51 per cent of their passwords across different services, meaning one breach cascades into many.
For SMBs, the consequences are disproportionate. Research compiled by NinjaOne and VikingCloud indicates that the average breach costs a business with fewer than 500 employees $3.31 million. Downtime alone runs approximately $53,000 per hour. By 2026, an estimated 46 per cent of all successful cyberattacks on SMBs will originate from credential reuse, up from 33 per cent in 2023.
The pattern is clear: businesses that treat password management as a solved problem, or as something that will soon be obsolete, are the most exposed.
There is a cognitive bias at work here. The promise of passwordless authentication gives organisations permission to underinvest in password security today. “Why spend on a password manager if passwords are going away?” is a question that sounds reasonable until you consider that 76 per cent of businesses are still relying on them, and will be for years. The analogy is a homeowner declining to repair a leaking roof because they plan to renovate the house eventually. The leak does not wait for the renovation.
What “good enough” password management looks like in 2026
The password management market has grown considerably. Mordor Intelligence projects it will reach $8.07 billion by 2031, growing at 22.39 per cent annually. But the market is also splitting. At one end, consumer-focused tools compete on polish, browser autofill, and app integrations. At the other, enterprise identity platforms (Okta, Microsoft Entra, CyberArk) bundle password vaults into broader access governance suites that cost tens of thousands annually.
In between sits a growing number of business-grade password managers that aim to provide enterprise security features at SMB-friendly prices. The features that matter most in this segment have shifted significantly over the past two years.
Directory integration is now table stakes. A password manager that cannot sync with Google Workspace or Microsoft Entra ID creates more administrative overhead than it eliminates. Automatic provisioning (adding users when they join the company directory) and deprovisioning (revoking access when they leave) are no longer luxury features. They are basic security hygiene. Just-In-Time (JIT) provisioning, where accounts are created automatically on first login, takes this a step further by eliminating the gap between a new hire’s first day and their access being properly configured.
Zero-knowledge architecture matters more than ever. After the LastPass breach of 2022, where encrypted vault data was stolen and subsequently linked to cryptocurrency thefts exceeding $150 million, the question of who holds the encryption keys became urgent. Zero-knowledge models, where the provider never has access to your decryption keys, offer a structural defence that does not depend on the provider’s own security practices being perfect.
Compliance certification is a differentiator. SOC 2 Type II certification, which validates security controls through an independent audit over an extended period, was once the domain of enterprise tools. Smaller vendors are now achieving it, and for businesses in regulated industries (healthcare, finance, legal), this certification can determine whether a tool is even eligible for procurement.
A case study in bridging the gap
One company that illustrates this “bridge strategy” Passpack, a business-focused password manager that launched a significant product overhaul in February 2026. The update is instructive not because it is singular, but because it represents a broader trend: credential management tools adding identity infrastructure features that used to require separate, expensive platforms.
Passpack’s update added Active Directory integration with Google Workspace and Microsoft Entra ID, JIT provisioning, device registration with encryption key bypass, and enhanced session controls. The company also achieved SOC 2 Type II certification and entered a partnership with HENNGE, a Japanese identity and access management company, signalling expansion into the Asia-Pacific enterprise market.
The pricing is notable. Passpack’s business plan, which includes SSO, directory sync, JIT provisioning, and API access, costs $4.50 per user per month. By comparison, 1Password Business runs $7.99, Keeper Business $7.00 (with SSO as a paid add-on), and Dashlane Business $8.00 per user. For a 50-person company, the annual difference between Passpack and 1Password Business is roughly $2,100.
Keith Deters, Passpack’s founder, has positioned the product as “enterprise-grade security without the complexity or cost of traditional enterprise tools.” It is a claim worth interrogating: can a tool at this price point genuinely match the security posture of competitors charging two to four times as much?
The answer appears to be partially yes. The zero-knowledge architecture and SOC 2 Type II certification put the security model on comparable footing. The directory integration and JIT provisioning address the administrative automation that larger competitors have offered for longer. The gaps are real but specific: Passpack currently lacks browser extensions, native mobile apps, and features like dark web monitoring that 1Password and Keeper include. A browser extension is on the 2026 roadmap.
For teams that work primarily from desktops and do not require autofill on mobile, the trade-off may be worth the savings. For those that do, the premium competitors justify their pricing through broader platform coverage.
The broader point is not that one vendor is superior. It is that the feature floor for business password managers has risen considerably. Directory integration, JIT provisioning, zero-knowledge encryption, and compliance certification are no longer differentiators exclusive to the top tier. They are available at price points that make “we cannot afford proper credential management” an increasingly difficult argument to sustain.
The European regulatory context
Europe adds another layer of urgency. The NIS2 Directive, which took effect in October 2024, imposes cybersecurity obligations on a far wider range of businesses than its predecessor, including SMBs in critical sectors like energy, transport, health, and digital infrastructure. Among the requirements: organisations must implement appropriate measures for access control and asset management, including credential management.
The Digital Operational Resilience Act (DORA), which applies to financial entities across the EU from January 2025, explicitly addresses ICT risk management, including authentication and access control frameworks. For European businesses in scope, the choice of password management tool is no longer just an IT decision. It is a compliance obligation with potential penalties.
This regulatory pressure is pushing European SMBs toward tools that can demonstrate compliance through certifications and audit trails, rather than simply promising security through marketing language.
The convergence of NIS2, DORA, and GDPR creates a layered compliance burden that smaller firms are only beginning to reckon with. A password manager that provides exportable audit logs, enforces configurable password policies, and carries an independent security certification simplifies this burden materially. One that does not adds risk on top of the operational risk it was supposed to mitigate.
What to look for right now
For businesses evaluating their password management strategy in 2026, the practical checklist is shorter than the market would suggest. Five things matter:
Zero-knowledge encryption where the provider cannot access your data, even under a court order or a breach of their own infrastructure. This is non-negotiable after the LastPass incident demonstrated what happens when encrypted vaults are stolen from a provider that held some key material.
Directory integration and automated provisioning that connects to your existing identity provider. Manual user management in a password vault is a security risk in itself: departed employees with lingering access, new hires without proper credentials, and no central visibility into who has access to what.
Compliance-grade audit logging that records every credential access, share, and change. For regulated businesses, this is a requirement. For everyone else, it is an insurance policy.
An independent security certification like SOC 2 Type II. Self-reported security claims are worth exactly what they cost. Third-party validation costs the vendor real money and real effort, which is precisely the point.
A credible transition path toward stronger authentication. The best password managers in 2026 support SSO, multi-factor authentication with hardware tokens, and are building toward passkey integration. A tool that treats password storage as its final destination is already behind.
This last point deserves emphasis. The goal is not to find the perfect password manager and settle in. The goal is to find one that secures your credentials today while positioning your organisation to adopt passwordless authentication when your infrastructure, your vendors, and your users are ready. That timeline will be different for every business, but the direction of travel is not in doubt.
The uncomfortable middle ground
The cybersecurity industry prefers clean narratives. Passwords are dead; long live passkeys. In reality, most businesses will spend the next three to five years in an uncomfortable middle ground where some systems use modern authentication and others still require a username and a string of characters that a human being chose (probably poorly).
The companies that navigate this transition safely will not be the ones that waited for passwordless to arrive. They will be the ones that took password management seriously as a bridge: encrypting credentials with zero-knowledge architecture, automating provisioning through directory integration, enforcing policies through admin controls, and documenting everything through audit logs.
It is not glamorous work. But then, most of cybersecurity is not. The breaches that make headlines are spectacular. The practices that prevent them are mundane. A well-managed password vault will not win any innovation awards in 2026. It might, however, prevent your company from becoming a case study in someone else’s breach report.
