A couple of months back, I advocated killing your password policies and applying some other techniques instead to make existing use of passwords more effective (including my hobby horse: take the user-experience sting out of rotating ordinary static passwords by pushing them out to users on an alternate channel, à la activation codes and other OTPs). But adding factors is still a great idea, and the barriers to doing so are falling fast.
It has finally become hip not just to predict the demise of passwords, but to call for their elimination. The recent Wired article makes an eloquent case about the vulnerabilities that even "strong" passwords are subject to, such as social engineering and outright theft. And strength is, of course, relative and subject to degradation: The latest computer hardware can make short work of cracking more-complex secrets.
It's true: Static shared secrets are sitting ducks. But passwords are too useful to go away entirely, both because it's handy to be able to synchronize authenticator data between cooperating systems (and people), and because people find using passwords to be less invasive, fiddly, or personally identifying than a lot of other options. So I don't buy the whole "the era of passwords is over" thing. They will be at least one important element of authentication strategies for the foreseeable future -- it's a rare multi-factor authentication strategy that doesn't include a password or PIN somewhere along the line as one of the "things you know."
So, if that's our reality, let's think outside the box in using them. In talking with Mike Gualtieri recently as part of his TechnoPolitics podcast series, I mentioned a few ideas. I had thought of these as pet password peeves, but on the cusp of 2013, why not be positive and think of them as resolutions?