Amazon IAM is not designed for providing short-lived credentials. You should create IAM Users for long-lived requirements, such as logins for humans and logins for persistent applications.
An IAM User should not be used for application login purposes. For example, if you are creating an Instagram-like application, you should maintain your own database of users or utilize Amazon Cognito for user authentication.
So, how do you then grant users access to AWS resources? For example, if you have an Instagram-like application and you wish to grant application users the ability to upload/download their pictures in Amazon S3 but want to restrict access to a certain bucket and directory?...
The answer is to create temporary credentials using the AWS Security Token Service (STS). Credentials can be created with a given policy for a specific period of time. These credentials work immediately. For example, if an Instragram-like user logs into the app, the backend app could generate temporary credentials that allow the user to access a specific directory within a specific Amazon S3 bucket for a set period of time (eg 15 minutes). These credentials are then passed to the mobile app/web browser for direct access to AWS services.