Modern authentication in Office 365 enables authentication features like multi-factor authentication (MFA) using smart cards, certificate-based authentication (CBA), and third-party SAML identity providers. Modern authentication is based on the Active Directory Authentication Library (ADAL) and OAuth 2.0.
By default, modern authentication isn't enabled in Exchange Online, but you can enable it.
Enable modern authentication in Exchange Online
Connect to Exchange Online PowerShell as shown here.
Run the following command in Exchange Online PowerShell:
Set-OrganizationConfig -OAuth2ClientProfileEnabled $true
To verify that the change was successful, run the following command in Exchange Online PowerShell:
Get-OrganizationConfig | Format-Table -Auto Name,OAuth*
When you enable modern authentication in Exchange Online, we recommend that you also enable it in Skype for Business Online. For instructions, see https://aka.ms/SkypeModernAuth.
Note that modern authentication is enabled by default in SharePoint Online.