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13 Identity Management Best Practices for Product Professionals

April 15, 2024

Striking the balance between rigorous security measures and a fluid user experience represents a challenge for identity companies.

While safeguarding processes and customers is essential, complicated verification procedures can result in drop-offs and revenue loss.

The solution? Implementing identity management best practices that harmonize security with user convenience.

This article explains how to enhance your identity management system, providing insights into creating a robust yet user-friendly framework. We'll analyze the benefits of effective identity management, identity management approaches, 13 essential practices to elevate security and user satisfaction, and the role of reusable digital identities in such a system.

Stay with us and discover best practices for identity management!

Identity Management Approaches

Identity management strategies have been categorized into three primary approaches: centralized, federated, and decentralized.

Each approach offers unique advantages and is suited to different operational environments, as we'll see below.

Centralized Identity Management

In this model, a single authoritative system manages all user identities and access permissions. This approach simplifies the administration of user data and access rights, offering a high degree of control and visibility.

However, centralized databases present significant challenges when it comes to scaling and security. As these databases accumulate more sensitive personal data, they become increasingly costly to maintain and protect. The core issue is that the concentration of vast amounts of data in a single repository makes it an attractive target for cyberattacks. Consequently, organizations must continuously invest in advanced security measures to safeguard this information. This includes employing sophisticated encryption methods, robust access control systems, and comprehensive monitoring solutions to detect and respond to threats promptly.

Organizations often favor centralized systems looking for simplicity and ease of management.

Federated Identity Management

Federated systems allow separate organizations to share identity information securely, enabling users to access multiple services with a single set of credentials.

This approach enhances user experience by reducing password fatigue and easing access to a broader range of services.

It's particularly beneficial in ecosystems where users need to interact with multiple services or applications across different organizations.

However, federated identity management also introduces specific privacy issues. When entities such as Google and Facebook act as identity providers, they have the potential to track user activities across various platforms.

Each time a user logs into a service using one of these federated identities, the identity provider can record this login event, effectively mapping the user’s internet behavior. This capability raises concerns about user privacy, as it could lead to extensive data collection about an individual’s online actions and preferences.

Decentralized Identity Management

Decentralized identity management represents a shift towards giving users control over their identity data.

This approach, which utilizes technologies like verifiable credentials, allows for creating reusable verified digital identities where users can manage their credentials without relying on a central authority.

Such a model enhances privacy and security, as hackers have no central data repository to target.

Decentralized reusable identities are increasingly relevant in discussions about the future of digital identity, particularly for applications that require a high level of trust and security and for organizations that want to reduce their onboarding friction.

The choice among these approaches depends on various factors, including your organization's specific security needs, regulatory environment, and user experience goals.

13 Identity Management Best Practices

Here are 13 identity management best practices that can improve your processes.

1. Establish a Comprehensive Identity Management Policy

A comprehensive identity management policy sets the foundation for secure and efficient handling of digital identities.

It should detail the protocols for identity verification, security measures, and the handling of data breaches, ensuring all stakeholders are aware of their roles and responsibilities.

Your company should review and update this policy regularly to adapt to new security challenges and regulatory requirements.

2. Incorporate Privacy by Design

Privacy by design means considering privacy and data protection at the project's initial design stage and throughout its lifecycle.

This good practice involves minimizing data collection, retaining data only as long as necessary, and protecting it through encryption and other security measures, such as Zero-Knowledge Proofs.

By embedding privacy into the development process, companies can ensure they comply with regulations like GDPR from the outset, building trust with users and avoiding costly penalties for data breaches.

3. Implement Strong Authentication Methods

Enhancing security with strong authentication methods, such as multi-factor authentication, reduces the risk of unauthorized access.

MFA requires users to provide at least two verification factors, which could include:

  • Something they know (the password),
  • Something they have (a smartphone),
  • Something they are (biometric verification).

In fact, employing biometrics, like fingerprint or facial recognition, offers a higher security level for accessing sensitive systems, balancing security needs with user convenience.

4. Conduct Regular Security Audits and Compliance Checks

Regular security audits and compliance checks are crucial for identifying vulnerabilities in the identity management system and ensuring adherence to regulations such as GDPR and HIPAA.

These audits should assess the following:

  • The effectiveness of current security measures,
  • The adherence to policies and procedures,
  • The system's ability to protect against current and emerging threats.

Promptly addressing identified issues ensures continuous protection and regulatory compliance.

5. Educate Users on Security Best Practices

User awareness is a critical line of defense against cyber threats. Education campaigns should cover recognizing phishing attempts, the importance of strong passwords, and secure browsing practices.

Empowering users with the knowledge to act securely enhances the overall security of a system.

6. Follow the Zero Trust Principle

The Zero Trust principle assumes that no entity, internal or external, should be trusted by default.

Implementing Zero Trust involves strict access controls and verification for every access request.

This minimizes the attack surface by ensuring that only authenticated users and devices can access network resources, reducing potential threats.

7. Plan for Scalability and Flexibility

An effective identity management system must be scalable and flexible to adapt to the organization's growth and the evolving digital environment.

Technologies that support scalability, like cloud-based solutions and microservices architectures, ensure the system can handle an increasing number of users and transactions.

Employing reusable digital identity credentials plays a role in achieving flexibility. These credentials, which are stored on users’ mobile devices, ensure that verification and authentication happen peer-to-peer and are processed locally on their devices. This makes the system much more scalable while maintaining high security and privacy standards.

Such technology allows for secure, interoperable, and user-controlled identity data. Utilizing it enhances user convenience, accelerates customer onboarding, and reduces the burden on identity management systems, making them more efficient and adaptable to change.

8. Automate the Onboarding Process

Automating the onboarding process improves efficiency, reduces errors, and enhances the user experience.

Automation can streamline the verification of user credentials, account creation, and the assignment of access rights, making the process faster and more reliable.

This improves security by minimizing manual errors and enhances user satisfaction by providing a great onboarding experience.

9. Use Advanced Threat Detection Techniques

Advanced threat detection techniques, leveraging artificial intelligence and machine learning, can help you identify and mitigate cyber threats in real time.

These systems analyze vast amounts of data to detect patterns and anomalies indicative of malicious activity, allowing immediate response to potential security incidents.

This proactive approach helps you neutralize threats before they cause significant damage.

10. Leverage Single Sign-On (SSO)

Single Sign-On technology enhances user experience by allowing access to multiple applications with a single authentication event. This reduces password fatigue and the risk associated with managing multiple credentials.

SSO must be implemented securely, often in conjunction with strong authentication methods, such as digital IDs, to ensure that ease of access does not compromise security.

11. Regularly Update and Patch Systems

Keeping software and systems updated with the latest patches is a fundamental security practice.

Regular updates help you address vulnerabilities, protecting the identity management system from exploits that could lead to unauthorized access or data breaches.

A structured patch management process is essential for timely updates, minimizing the window of opportunity for attackers.

12. Adopt Decentralized Reusable IDs

Decentralized Reusable ID technology enables customers to reuse their high-quality verified ID data across multiple services, reducing onboarding friction without compromising security.

When customers can present their pre-verified digital ID credentials, they no longer need to repeatedly input their details or gather physical documents every time they want to sign up for a new service. This seamless approach saves time by allowing customers to share dozens of verified ID data points in seconds. The result is a quick onboarding process that leads to higher conversion rates and a boost in revenue for businesses.

This model utilizes verifiable credentials and cryptography to create secure, verifiable identities that users can manage independently. Decentralized IDs enhance privacy and security, fostering trust in digital interactions.

Decentralized, reusable IDs also empower users with greater control over their identity information, reducing reliance on central authorities and mitigating the risk of centralized data breaches.

Customers manage their credentials independently, using digital ID wallets as a secure repository for their identity data. This offers security and control, allowing users to share only the necessary information with verifiers without exposing additional personal details.

An essential feature of this decentralized approach based on self-sovereign identity is the emphasis on user consent. Every time a service requires identity verification, the user explicitly grants permission, choosing exactly what information to share and with whom.

This consent-based model enhances privacy and aligns with data protection regulations, which prioritize user consent in the processing of personal data.

13. Leverage a Decentralized Data Architecture

A decentralized data architecture for identity management is a paradigm shift towards enhancing security, privacy, and scalability.

This approach disperses data across a network rather than storing it in a central database. It mitigates the risks associated with centralized data storage, such as single points of failure and attractive targets for hackers.

An example of decentralized architecture's efficacy is the Digital Health Pass that IBM developed for the state of New York during the peak of the COVID-19 pandemic.

The challenge was verifying millions of people's test results or vaccination statuses without storing any of their health data, thereby avoiding additional compliance and privacy issues.

IBM's solution utilized decentralized ID credentials, enabling individuals to store their health information directly on their mobile devices.

The benefits of such a decentralized architecture include:

  • Privacy Preservation: Organizations can verify necessary credentials without storing personal health information, respecting user privacy and reducing compliance burdens associated with data protection regulations.
  • Scalability and Reliability: Because verification is peer-to-peer and processed locally on the user's device, the system can handle a vast number of verifications simultaneously without overloading central servers. This ensures the system remains operational and responsive, even under heavy load, effectively managing millions of credentials and verification requests.
  • Reduced Infrastructure Strain: The decentralized architecture's decentralized nature means minimal infrastructure requirements for verifying entities. The system's operational resilience is not dependent on the continuous uptime of centralized servers, making it robust against network disruptions and high traffic volumes.

By leveraging a decentralized data architecture, identity management systems achieve unprecedented levels of scalability, security, and user privacy.

Identity Management Benefits

Implementing robust identity management brings benefits such as enhanced security, improved user experience, and reduced operational costs. Below, we will analyze these and other advantages.

Security Enhancement

By employing robust identity management protocols, companies mitigate the risk of data breaches.

Implementing features such as multi-factor authentication (MFA) and continuous monitoring ensures that only authorized users can access sensitive information, thus protecting against cyber threats.

Compliance with Regulations

With data protection regulations such as GDPR (General Data Protection Regulation) and HIPAA (Health Insurance Portability and Accountability Act) becoming more and more stringent, identity management best practices help companies with data compliance.

If you manage and safeguard user data according to legal standards, you'll avoid hefty fines and reputational damage for your company.

Improved User Experience

Efficient identity management streamlines user verification processes, reducing friction and enhancing the user journey.

A seamless sign-up experience can boost user satisfaction and retention, positively impacting the company's bottom line.

Reduced Operational Costs

Automating identity verification and allowing users to reuse their verified ID data to access other services can lead to cost savings.

By minimizing manual oversight and streamlining onboarding, companies can allocate resources more effectively, enhancing productivity and profitability.


As businesses grow, managing digital identities becomes more complex.

Effective identity management should be designed to scale, accommodating an increasing number of users without jeopardizing security or performance.

Risk Reduction

Comprehensive identity management strategies encompass risk assessment and mitigation measures, enabling companies to anticipate and counteract potential security threats before they manifest.

Challenges When Implementing Identity Management

Implementing an effective identity management system presents challenges. Below, we'll explore some of them and provide solutions for overcoming these obstacles.

Integration with Existing Systems

Integrating new identity management solutions with existing IT infrastructure can be tricky. Legacy systems, disparate software applications, and customized workflows often require significant adaptation to ensure integration.

Solution: Employ middleware or use APIs that facilitate communication between new identity management solutions and existing systems. For example, launching a digital identity ecosystem allows organizations to create a network of trusted digital identity issuers and verifiers through an API. Digital ID ecosystems simplify secure ID data exchanges across organizations, eliminating the complexity of creating bespoke integrations for each stakeholder.


As your organization grows, so does the demand on its identity management system. Scalability becomes a challenge when systems must expand to accommodate an increasing number of users, transactions, and security assessments without a drop in performance.

Traditional centralized architectures often struggle to scale efficiently due to the concentration of data and processing power.

Solution: Adopting a decentralized architecture leveraging reusable identity credentials can significantly enhance scalability. Unlike centralized systems, decentralized identity management distributes data and processing across a network, reducing bottlenecks and improving system resilience.

Incorporating decentralized architecture into your identity management strategy will help your system adapt to changing demands without compromising security or performance.

User Experience

Ensuring a positive user experience while maintaining robust security measures is one of the most delicate balances in identity management.

Overly complex or time-consuming authentication processes can lead to user frustration and drop-offs.

Solution: You can enhance the user experience without compromising security through implementing reusable identities. When users can present their pre-verified digital ID credentials, they no longer need to repeatedly input their details or gather physical documents every time they want to sign up for a new service.

By leveraging technologies such as single sign-on (SSO) in conjunction with reusable digital IDs, organizations can make the authentication process more fluid, making it secure and user-friendly.

Furthermore, incorporating user-friendly authentication methods, such as biometrics, can improve the user experience with an efficient verification process.

Engaging with users to collect feedback on their experiences also helps identify areas for improvement, ensuring the identity management system continually evolves to meet user needs effectively.

Compliance and Regulatory Requirements

Staying compliant with evolving data protection regulations poses a significant challenge, requiring continuous monitoring and adjusting identity management practices.

Solution: Design your identity management system with compliance in mind, incorporating features that enable easy adaptation to new regulations. Consult compliance experts to ensure your system meets all legal requirements.


The financial implications of deploying and maintaining an advanced identity management system can pose challenges, especially for small to medium-sized organizations.

The costs associated with software licensing, infrastructure upgrades, and ongoing maintenance can accumulate, making it vital to find cost-effective solutions.

Solution: Adopting a reusable digital ID platform can help you bring different sets of verified data into one ID credential that is tamper-proof and universally verifiable.

The power of reusable ID technology goes beyond accelerating customer onboarding; it introduces new revenue opportunities by issuing and verifying reusable credentials. This strategic move improves the bottom line by monetizing digital identity in previously unimagined ways, helping organizations turn ID verification from an expense into a profitable and frictionless process.

Change Management

Adopting a new identity management system often requires changes in organizational processes and user behavior, which can meet resistance.

Solution: To ease the transition, implement a comprehensive change management strategy with clear communication, educational programs, and support structures. Engage stakeholders early in the process to foster buy-in and smooth implementation.


Implementing identity management best practices is essential, but the benefits pay off. Your company will protect its customers' digital IDs, comply with regulatory requirements, and provide a great user experience, thereby fostering sustainable growth.

Now, explore the advantages of reusable identity and its benefits to enhance your organization's identity management strategy.


1. What are the identity management best practices?

Identity management best practices include:

  • Establishing comprehensive policies.
  • Incorporating privacy by design.
  • Implementing strong authentication methods.
  • Leveraging advanced technologies like reusable digital IDs and decentralized data architectures.

2. Why is scalability important in identity management?

Scalability ensures that an identity management system can handle an increasing number of users, transactions, and security checks without degradation in performance.

It's crucial for maintaining efficiency and security as an organization grows. Decentralized architectures, which distribute data and processing across a network, are particularly effective at enhancing scalability.

3. How can identity management improve user experience?

Identity management improves user experience by making the authentication process more fluid, reducing onboarding frustrations, and enabling smoother access to services.

Technologies such as reusable digital IDs minimize the need to repeatedly input details or gather physical documents every time users want to sign up for a new service, making the process more user-friendly.

4. What role do reusable digital IDs play in identity management?

Reusable digital IDs allow users to reuse their verified ID data across multiple services without undergoing separate verification processes for each one.

This enhances user experience and reduces drop-offs associated with user onboarding and authentication.

5. How can organizations address the costs associated with identity management?

Organizations can manage costs by adopting cloud-based solutions and reusable digital ID technology, which offer scalable, pay-as-you-go pricing models. These solutions allow for cost-effective scaling, making advanced identity management accessible to businesses of all sizes.

6. What challenges do companies face when implementing identity management?

Challenges include:

  • Integrating new solutions with existing systems.
  • Ensuring the scalability of the identity management system.
  • Balancing security with user experience.
  • Adhering to compliance and regulatory requirements.
  • Managing costs.
  • Dealing with the complexities of change management.

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