Identity management: what it is and how it works

Identity management: what it is and how it works

Over 7.5 billion pieces of personal information are now circulating on the dark web—a sharp 44.8% increase since 2022. 

This data includes richer datasets than before, with a 45% rise in records combining personal and contact details. Among these, email and password combinations appear together in 94.4% of cases, giving hackers nearly everything they need to bypass security systems and slip right into users’ accounts.

In an environment where digital identities are increasingly vulnerable, identity management isn't just another layer in your security stack—it's the foundation that determines whether your defenses hold firm against threats or leave gaps that can be exploited.

Effective identity management is essential to digital security, ensuring that access to sensitive information is carefully verified and monitored. As cyber threats continue to increase, so does the need for strong identity management solutions to protect both users and organizations.

In this guide, we’ll explore the essentials of identity management, answering key questions to help you navigate today’s security challenges and enhance user experiences.

What is identity management?

Identity management, also referred to as ID management or IDM, is the process of verifying and protecting user identities across digital ecosystems, ensuring secure access while providing a smooth experience for both users and service providers. Identity management is akin to checking user IDs at the entrance to a secure building—confirming that each person is who they say they are before granting them entry.

In the digital world, identity management verifies the identities of users—whether individuals or devices—and confirms their access levels to sensitive data and tools. Across digital ecosystems, identity management ensures that only authorized users can access accounts, applications, and systems. 

Effective identity management is essential for protecting personal and business data, as well as maintaining trust between users and service providers. When done right, it minimizes security risks and maximizes data protection, reducing the chances of breaches and unauthorized access. 

Beyond serving as a first line of defense against cyber threats, identity management is also key to improving user experiences. By allowing authorized users to access systems seamlessly, identity management reduces the need to repeatedly enter passwords and creates a frictionless sign-in experience. With identity management, organizations benefit from both stronger user engagement and a smoother, more secure digital environment.

Key processes involved: identification, authentication, and authorization

Now that we've defined identity management, let's look at the key processes involved: identification, authentication, and authorization. 

These three steps work in sequence to grant safe system access in real time: 

1. Identification: The process of recognizing users by collecting their information, such as email addresses or usernames

2. Authentication: Verifying that users are who they claim to be, typically through passwords or unique security codes

3. Authorization: Granting authenticated users the appropriate level of access based on their identity and role within the system

We'll delve into a more detailed step-by-step breakdown of these processes, but first, let’s compare identity management to similar digital security concepts. 

Identity management vs. access management

When searching the web for a solid identity management definition, you’ll likely come across the term "access management." While identity management and access management are interrelated, they’re still two different processes. 

Identity management

Identity management focuses on the specific attributes that identify a user, group of users, or devices requesting access to a system. This process protects identifying details through various authentication methods, such as passwords, tokens, and multifactor authentication. 

Identity management also maintains these details over time, allowing authorized personnel like network administrators or IT directors to track and make necessary adjustments, such as account updates or permission changes.

Access management

Access management, meanwhile, focuses on defining and enforcing individual user permissions and access rights. It assesses whether a user or device complies with an organization’s policies before granting access to certain resources, ultimately making a straightforward yes-or-no decision based on the attributes of the user or device. 

Think of it this way: just because a user is allowed on a company network doesn’t mean they can access everything. That would be like giving all users the ability to edit an entire application instead of limiting those rights to internal developers. Access management leverages attributes like role, organizational level, or membership group to determine which resources each user can access.

In other words, identity management ensures that only authorized individuals gain entry to the network, while access management determines what actions they can take once inside. 

Together, these two processes create a secure environment where users are both authenticated and given the permissions necessary for their roles, allowing for frictionless sign-ins. 

The goals of identity management

We’re living in an era of data breaches. By October 2024 alone, over 1 billion personal records, including medical data from US residents, had been stolen.

The primary goal of ID management is to reduce the risk of breaches and block the bad actors behind them, securing access to an organization’s digital resources and information. By ensuring that only authorized users can enter systems and access sensitive data, organizations can better protect their assets against ongoing threats. 

Another key goal of identity management is to streamline user access and enhance the overall user experience. Whether through single sign-on (SSO) processes or multifactor authentication, managing identity credentials allows users to access the applications or information they need without any unnecessary hurdles. 

It’s essential to choose the right tools and technologies to help achieve these goals. That brings us to another frequently asked question: what is an identity management system?

What is an identity management system?

An identity management system is a suite of tools and processes designed to create, monitor, and secure user identities, ensuring that authorized individuals can access the appropriate resources.

Consider these tips to select the right IDM system for your organization:

• Look for a system that offers two-factor authentication across multiple channels, like text messages, email, and WhatsApp, to enhance security.

• Choose a system that can integrate a one-time password (OTP) solution to manage connectivity, monitor fraud, and prevent unauthorized access.

• Decide on a system that can confirm identities by matching user-supplied data, such as a phone number, against authoritative sources to prevent false account creation. 

Above all, focus on achieving ID management goals through a system that ensures a smooth user experience. Twilio's identity management solutions enable easy access to resources while maintaining strict security protocols. 

How does identity management work?

Identity management is a multi-step process involving three key processes: identification, authentication, and authorization—all of which can be controlled and optimized through an IDM solution.

First, users are identified by their credentials, such as usernames or email addresses. Next, their identities are authenticated to confirm they are who they claim to be. Finally, their identities are authorized to access specific resources based on their permissions.

Here’s that detailed breakdown we promised earlier to better understand identity management in action. 

1. Identification

Whenever a user registers for or signs in to a secure account or system, they must identify themselves by providing personal information. This step in the IDM process establishes the user’s identity based on these unique credentials, which can include:

• User names

• Email addresses

• Phone numbers

• Loyalty account numbers

• Employee numbers

Security systems rely on these details to decide whether someone can access the requested network. 

However, without additional verification, security systems can't confirm whether someone is using their real identity or if a bad actor is impersonating them. For instance, fraudsters often create fake accounts using stolen phone numbers.  

Solutions like the Twilio Lookup API use real-time, mobile-based identity intelligence to validate phone numbers and protect against fraud. Once a phone number or another type of credential has been verified, the identity management process advances to the authentication stage.  

2. Authentication

The IDM authentication step verifies a user’s identity through one or more methods designed to enable secure system access. 

These methods fall into four categories:

1. Knowledge-based: Relies on information the user remembers, such as a password or PIN code 

2. Possession-based: Depends on items the user owns, such as a security token, digital certificate, or smart card

3. Biometric-based: Uses the user’s physical traits, like fingerprints, facial features, or eye characteristics

4. Multifactor: Combines multiple channels the user can access, such as SMS verification or email OTPs

Once a user is authenticated through one of these methods, the identity management process proceeds to the final step: authorization. 

3. Authorization

The act of granting the appropriate system or network access based on a user’s verified identity is called authorization. This step of the ID management process confirms the user’s roles and permissions, defining what actions they can take once they’re granted entry.

For instance, a manager may have permission to view sensitive financial reports, while regular employees have restricted access. Similarly, customers may have limited document viewing or editing capabilities compared to internal employees. 

Because authorization depends on specific user roles, permissions, and organizational policies and governance, it always comes last, following identification and authentication. A security system must establish and confirm a user’s identity before determining what they can and can't do. 

With these three steps in mind, let’s explore the role of identity management systems in a user’s access lifecycle. 

Identity management systems

The IDM process assigns each user a digital identity, verifies it, and then grants the appropriate access. Beyond initial setup, it also includes monitoring, maintaining, and updating user identities over time. 

A reliable identity management system streamlines this entire process with a range of key features that integrate directly with your security system, including:

• User provisioning automates the creation, management, and deletion of user accounts to ensure accurate access and role assignments.

• SSO allows users to access multiple applications using a single set of credentials to simplify the login process. 

• Identity governance establishes policies and controls to meet privacy requirements and manage credentials effectively.

For instance, Twilio Verify is a ready-to-use API that confirms user identities. It offers frictionless two-factor authentication across channels and enables secure transactions. 

Benefits of effective identity management

With cybercrime on the rise, the most obvious benefit of IDM is protection against cyber threats. 

By ensuring that only authorized users can access sensitive information, organizations can significantly reduce the risk of data breaches and other cyber incidents. This proactive approach helps safeguard personal and business data and boosts customer trust.

For organizations, identity management also improves operational productivity and enhances internal workflows. System administrators can automate many account-related tasks, like onboarding new customers or adding devices to the network. 

Not only does this automation speed up the process of granting access and permissions, but it also helps reduce administrative costs. Centralized ID management can shorten these processes from days to minutes, delivering significant savings along the way.

More importantly, effective identity management helps organizations comply with legal and regulatory standards like GDPR and HIPAA. By implementing robust identity controls, organizations can better manage user data and demonstrate their commitment to protecting sensitive information. This helps reduce the risk of costly fines and protects professional reputations. 

Effective IDM benefits the user experience as well, making it easier—and safer—for users to access the information they need. 

Common challenges in identity management

IDM presents several challenges, and user adoption is often the first hurdle. Users may resist new systems that disrupt familiar workflows, even though identity management systems are designed to simplify their processes.

But even after you succeed with user adoption, scalability can become an issue, especially as organizations onboard more users, applications, and devices. Without a scalable identity management system, keeping up with the demands of a growing network can lead to inconsistencies or, worse, security gaps.

Integrating with existing systems is another common challenge. Many organizations rely on a mix of legacy systems and modern applications, so implementing new identity tools can be difficult. 

To overcome—or even completely avoid—these challenges, opt for a fully managed turnkey API like Twilio Verify.

Verify enables scalable multichannel authentication with frictionless, real-time verification, ensuring user accounts and personal data stay secure. Silent Network Authentication adds an extra layer of protection without requiring users to wait or leave your app. It operates in the background without interrupting the user experience and integrates seamlessly with your existing tech stack through developer-first APIs.

Experience next-level identity management with Twilio

Now, more than ever, identity management plays a critical role in protecting digital assets by verifying user identities and granting the appropriate system permissions. This process not only serves as a first line of defense for sensitive data but also streamlines user access.

When choosing an identity management system, future-proof your operations with a tool that grows with your organization. Strengthen your security with Twilio Verify, a solution engineered to scale with you. 

Twilio Verify offers a powerful solution for managing identity, providing effortless integration and advanced verification features that adapt to evolving security needs. Explore how Twilio Verify can help safeguard your assets and streamline user access through a single API today.