iOS 16.3 appears to be impacting the iCloud Backup feature for some people who have upgraded to the new software, based on complaints on the MacRumors forums and the Apple Support communities.
Impacted users have seen automatic iCloud Backup disabled, and attempting to turn on automatic backups results in the following message: "An unknown error occurred. Please try again later." With the error message, the "Back Up This iPhone" toggle under Settings > Apple ID > iCloud remains deactivated.
iPhone owners who are experiencing this problem seem to still be able to manually activate an iCloud backup, but an iOS 16.3 bug appears to be preventing the setting from functioning as expected.
Some users were able to fix the problem by turning on two-factor authentication, leading to speculation that Apple is attempting to force people into using the extra authentication layer, but that does not seem to be the case. Two-factor authentication has not solved the problem for all users, and some people with two-factor authentication initially enabled have also had the same error. From one impacted user on the Apple Support Communities:
Same problem for me - iOS 16.3 on an iPhone and iPad - 2factor is turned on and have tried logging out and in of Apple ID and rebooting.
Despite speculation that Apple is attempting to force people into using two-factor authentication, there does not appear to be actual evidence that this is the case. The error message is vaguely worded, and if Apple was requiring two-factor authentication for iCloud Backup functionality, there would likely be a much more specific message providing an explanation.
It appears that this is an iOS 16.3 bug that will be addressed in a future update. For now, those impacted can do manual backups to keep their data safe.
Apple is working on an iOS 16.3.1 update that could include a fix for the iCloud issues, but there is no word yet on when that software update might be released.
Source: Macrumors