I don't know the general situation, but, at least in our small town, people would go to the phone service shop just for account setup and recovery, since it's just too complicated. Password managers and passkeys don't make things simpler for them either –– I've never successfully conveyed the idea of a password manager to a non-tech person; the passkey is somehow even harder to explain. From my perspective it's both the mental model and the extra, convoluted UX that's very hard to grasp for them.
Until one day we come up with something intuitive for general audience, passwords and the "worse" one-time code will likely continue to be prominent for their simplicity.