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Identity Provider: What Is It And Why Should You Invest In One?

Identity management integration is an essential process in today’s consumer-driven world. Identity providers are a great way to offer your consumers an easy sign-in method. So, when they are connecting to your website or online store, it can allow them to login once with their unique details and not have to remember multiple logins.


In the physical world, you’re required to show a government-issued ID to verify your identity. This might be a passport or a driving license, that verifies your name, address and other details. However, these IDs aren't efficient on the internet. Digital identities are what is required of end-users instead.

So, what better way to create individual IDs than onboarding an Identity Provider for your business?

What Is An Identity Provider (IdP)?

An Identity Provider is a third-party company responsible for creating, maintaining and managing digital Ids for a business. The provider also provides authentication services so that only the correct user can gain access to any account or data.

For example, you may often see “Sign up with X” options on websites that link to other accounts like Instagram. In this case, the website will first connect to Instagram’s server to verify the information you provide before granting access to your account. The website, therefore, acts as an identity provider.

Why Are IdPs Necessary?

An Identity Provider (IdP) serves as a centralized authentication system that enables users to access multiple applications and services with a single set of credentials.

In other words, IdPs act as a bridge between the user and the service provider, validating the user's identity and providing the necessary credentials to access the requested services.

The need for best identity providers/ IdPs has increased significantly due to the proliferation of web-based services and applications that require users to create and manage multiple accounts.

IdPs not only simplify the user's login experience but also improve security by reducing the number of passwords that users need to remember and ensuring that a trusted party authenticates the user's identity.

How Do IdPs Work?

The working mechanism of an identity provider is simple. When you sign up or apply to get a digital ID, you have to provide unique information. This can be your username, password, answer to a security question, captcha, etc. Once you have provided this unique information, you will receive a digital Id that proves your identity.

Without getting the right information, you will not be issued the Id. It is also worth noting that identity providers don’t store the username and password of their users. Instead, they verify the information you type in to issue a token (also known as digital Id).

5 Business Problems An Identity Provider Can Solve

Identity providers can solve various problems for your business. Here is a summary of the five most common problems.

1. Unreliability of passwords

More than 53% of internet users rely on memory to remember passwords. 51% of internet users use the same password for personal and professional accounts because they cannot remember the passwords. Also, people choose unwise ways like spreadsheets to save their passwords which can easily be hacked. IdP lowers this burden on the user.

2. Increasing efficiency

Most businesses provide accounts that can be used on multiple devices. It can be difficult for your IT department to manage all these details efficiently. With an IdP, these crucial parts are maintained by the provider instead of burdening your employees.

3. Simplifies account creation

Your businesses and their website can easily be accessed from all over the world. However, creating accounts for several thousand visitors per day is inefficient and time-consuming. An IdP simplifies the process for an end-user to use your service without creating any accounts.

4. Simplifies problem-solving

As a person in charge, you will need to solve all problems that arise. However, without knowing who caused the issue, it is impossible to solve. With an IdP, you can access who made which changes and restore the lost or changed work.

5. You can connect all accounts

Your consumer may often choose to log in using different accounts. For example, they may choose Google on the first try, then Facebook, then something else. Keeping track of all these interconnections and identities for the same person can be challenging. An IdP provides access using only one account, providing you with a clear picture of the user linked to the account.

What B2C Problems Can Identity Providers Solve?

B2C companies often face several challenges in managing their customer identities, including password fatigue, user experience friction, and data security risks. Identity Providers (IdPs) can help B2C companies solve these problems by offering a seamless and secure authentication process for their customers.

One of the most significant challenges that B2C companies face is password fatigue, where customers struggle to remember and manage multiple usernames and passwords for different websites and applications.

IdPs can solve this problem by providing a single set of login credentials that customers can use across multiple sites and applications. This not only simplifies the user experience but also reduces the risk of data breaches and improves data security.

Moreover, IdPs can also offer additional authentication factors such as multi-factor authentication (MFA) and biometric authentication, adding an extra layer of security to the authentication process. This reduces the risk of account takeover attacks, where hackers steal user credentials to gain unauthorized access to user accounts.

Identity Providers vs. Service Providers

Identity Providers (IdPs) and Service Providers (SPs) are two critical components of the federated identity management model. While both play crucial roles in managing user identities, there are some fundamental differences between the two.

An IdP is responsible for authenticating and authorizing users and providing them with access to different service providers. In contrast, an SP is a web-based application or service that users want to access. Let’s understand by an identity provider example - Google is an IdP that provides authentication services to users who want to access various services such as Gmail, Google Drive, and Google Docs. In this scenario, the various Google services would be considered SPs.

One significant advantage of the IdP model is that users do not need to create separate accounts for each service they want to access. Instead, they can use their existing IdP credentials to access multiple services, reducing the need to remember multiple usernames and passwords.

Another advantage of the IdP model is that it provides better security and control over user identities. Rather than relying on individual SPs to manage user identities, the IdP model centralizes identity management, providing better control over user identities and reducing the risk of data breaches.

The Security Benefits Of Using An Identity Provider

Identity providers can also make a significant difference in security for your business. Different methods can be used to increase the security benefits of an identity provider:

1. Strong KYC policy

You can implement a comprehensive KYC policy to ensure the credentials of each consumer remain unique. This will ensure strong authentication that can be used to verify a user’s identity in various steps (MFA).

2. Multi-factor authentication

Presenting multi-factor authentication for all end-users and employees will increase the security of your accounts and ensure no third party can gain access. While this method takes a few extra seconds, it can easily be used to identify any hackers.

3. Single Sign-On (SSO)

Many businesses choose to include a Single Sign-on (SSO) feature instead of MFA; there can be various advantages. It allows end-users to use your services without logging in again and again.


How To Integrate An Identity Provider With A CIAM Solution?

Identity providers use CIAM to connect the end-user's existing accounts to the business’s services. CIAM solutions also come with features that can enhance the process of authentication. This is generally done by implementing unique authentication protocols. Two well-known authentication protocols are:

1. OpenID provider

OpenID provider is an authentication protocol that uses an ‘identifier’ like a URL to verify the user’s identity. This end-user has previously registered an OpenID which they have to enter to verify their credentials.

2. SAML identity provider

The SAML identity provider allows IdPs to transfer authentication details to your business’s server and verify the identity of the end-user. This identity provider works on SAML authentication principles.

Most servers generally accept these and can make identity verification simple for your business and the consumer.

How LoginRadius Introduces Consumer-Centric Capabilities That Drive ROI?

LoginRadius has an auto-scalable infrastructure for IdPs that can seamlessly integrate new accounts as your businesses grow. It allows your businesses to simplify the process of signing up new users and discarding new accounts without compromising on the security of your data. This will further reduce the time and money required to manage passwords and increase your ROI.

LoginRadius’ cloud-based identity provider can be used for all web, gaming console and mobile applications. Cloud storage automatically increases the threshold according to your business requirements.


Choosing and integrating the right identity provider can have long term benefits for your business. Not only does it simplify the login process for the user, but it also allows you to keep track of your consumer’s accounts, data and passwords without hiring extra staff.

Frequently Asked Questions (FAQs)

1. What is the difference between an identity provider (IdP) and a service provider (SP)?

An IdP validates user identity and provides credentials to access various services, while an SP is a web-based application or service that users want to access.

2. What are the benefits of using an IdP for B2C companies?

An IdP can help B2C companies improve customer experience, reduce data security risks, and solve password fatigue by providing a single set of login credentials and additional authentication factors.

3. How do IdPs and SPs work together in federated identity management?

IdPs and SPs work together by establishing trust relationships between them, enabling users to access multiple services using a single set of credentials and improving security.

4. What is the advantage of using multi-factor authentication (MFA) with an IdP?

MFA adds an extra layer of security to the authentication process by requiring users to provide two or more authentication factors, such as a password and a security token.


Deepak Gupta

Written by Deepak Gupta

Deepak is the CTO and co-founder of LoginRadius, a rapidly-expanding Customer Identity Management provider. He's dedicated to innovating the LoginRadius platform. He loves foosball and winning poker games!

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