Why it's time to say goodbye to passwords

Anyone who's ever clicked on a ‘forgot your password?' thinks there's gotta be a better way. There is.

When Wallaby Financial launches a new version of its app, which helps users maximize rewards and points, later this summer, it will be missing one notable feature: a password.

"We'll authenticate their email address or their phone number," says Matthew Goldman, CEO of Wallaby Financial. "We're going to send them a one-time code to either of those locations, and they'll have to enter that back in the system. You have to prove that you have control of that phone number or email address in order to log into our system."

Then, he says, if the user stays logged in, his phone's authentication system will stand in place of entering a password into the app every single time.

Wallaby Financial is one of many groups trying to get rid of passwords all together. In June, the blogging site Medium ditched passwords, too.

[Related: Medium stays firmly anti-password with radical e-mail-based logins]

The big reason?  Passwords don't really work.

The password problem

"The problem with passwords is most people are very bad at remembering them," says Goldman. "They have too many of them and so they resort to fundamentally insecure behavior in order to deal with the problem of remembering lots of passwords."

According to a survey by Telesign, a mobile identity company, 73 percent of online accounts use duplicate passwords, 54 percent of consumers use five or fewer passwords across their entire life online, 22 percent use three or fewer, and 47 percent haven't changed their password in five years.

"We know it's bad because if one system is hacked, all of your profiles across many systems become vulnerable," says Goldman.

Before our lives moved online, passwords worked. "It was designed in a world where there were maybe three logins in your life," says Boris Jabes, co-founder of Meldium, a password and account manager. "No one I think planned on it becoming how you'd log into 100 plus places in a year or a month."

Passwords aren't just a hassle for website users it's a hassle for developers, too.

"If I'm a corporation, if I'm a website, then I have to build all the infrastructure to manage your password, store them correctly, allow people to forget them," says Jabes. And even that's not perfect. "The whole infrastructure around that is vulnerable. Either people will have weak ones or you will store them poorly and you will become a vector of attack," he says.

Password alternatives now

The password alternative being tested out right now is exactly what Wallaby Financial is doing: two-step authentication, relying on the smartphone and the fact that most people have it with them at all times.

"We do see mobile being very key to helping solving this problem," says David Rockvan, senior vice president and general manager of Entrust Certificate Servces at Entrust Data. "People want to carry them. You don't have that issue of making them carry around something extra."

[Related: Beyond passwords with biometric technology]

Consumers trust their phones, too, so the near-ubiquitous handhelds are becoming "a trusted platform for multipurpose ID," Rockvan added. "When you put all that together, we really think the phone or smartphone is actually going to be something you can utilize to drive stronger identity, hence moving away from passwords"

Another trend: letting another group do the authentication for you. By the end of this year, Wallaby Financial will allow customers to login through Google.

"Seventy percent of our users are already signing in with a Gmail address," says Goldman. "On Android phones it's already built in. Ultimately that's more security than using some terrible password like dog5.'"

Medium, the blogging site, lets users log in with Twitter, Facebook or an email address.

Password alternatives down the road

Rockvan sees third-factor authentication becoming an important part of security in the future, too: things like biometrics with touch ID which Apple already uses and retinal scans.

But Meldium's Jabes still doesn't see those kinds of systems as a silver bullet that replaces passwords entirely.

"The reason you haven't seen a solution magically appear is it has to be better for users," he says. "I can remove passwords and give you a phone-based login but is that even going to get one tip of the registrations to my website? Users are going to be more confused."

He adds that while startup companies are presenting possible solutions, he doesn't see the industry making a total shift away from passwords until a giant like Apple, Microsoft, Facebook or Google comes up with a solution.

"I hate to say this because I'm someone who comes from the startup world," he says. "I think this is one of those where a major player has to do something in order for real change to occur."

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