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Dynamics CRM 365 On-Premise (IFD) and SharePoint 2016 On-Premise Server-Server Integration - Cannot open Office documents in Client

I have a successful integration between SharePoint and CRM. My SharePoint Site Collection is a HNSC. The Web Application is Claims Based Authentication with Windows Integration (Kerberos) and I have set up SAML on the Web app.

Either on-site or off-site, I can upload a document successfully to an entity. Problem is that we cannot EDIT ANY Microsoft office document without being asked to authenticate. We receive a Sign In Dialog that asks us to "Select the credentials you want to use to logon to this SharePoint site". If we choose Windows Authentication it will ask three times and then say "Sorry, we couldn't open https://crmdocs.domain/doclib/doc.xlsx"

We can open other file types, but no MSOffice Docs. I have seen Office Web Apps Server mentioned in one article. Is this the only solution? Or have I made a mistake in my setup somewhere?

Thanks

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