ASP .Net impersonation - 'The user name or password is incorrect.'

I have a Web API application running on Windows Server 2016. It has the need to copy files from other servers on our network so I have impersonation set up in web.config as follows:

identity impersonate="true" userName="domain\username" password="xxxxx"

(eliminated the brackets so it would show up in the post)

I am getting the following error when I call my login API:

"Could not create Windows user token from the credentials specified in the config file. Error from the operating system 'The user name or password is incorrect."

The odd part is this scheme works perfectly on my test server using the exact same credentials and settings. The only difference between the 2 servers is the O/S (the test server is Server 2012) and the fact the test server is in a domain. The server I am having trouble with is in WORKGROUP.

However, the new server DOES HAVE access to the other servers I need to access. I can navigate to UNC paths on other servers with Windows Explorer using domain credentials and such. But, within the context of IIS/ASP .Net the authentication fails.

Any ideas?