Rapid cloud adoption, remote and hybrid work, and the proliferation of connected devices have not only increased the complexity of securing enterprises, but have also underscored the central role of identity and trust. As companies move to the cloud, support remote and hybrid work, and connect more devices than ever before, keeping systems secure has become more complex. At the center of this challenge is identity—knowing who is accessing what, and making sure only the right people get in.

Identity security: By the numbers

Cybercrime has undergone a fundamental transformation. Where attackers once targeted network vulnerabilities, today's breaches overwhelmingly stem from compromised identities. Recent industry reports paint a concerning picture: identity-related attacks now account for 61% of all security incidents, with each breach costing organizations an average of $4.5 million in recovery costs and lost business. This alarming trend has propelled identity security from a technical consideration to a boardroom priority, creating a market expected to grow from $16.6 billion in 2023 to $34.5 billion by 2028.

The scale of the challenge becomes apparent when examining enterprise identity landscapes. Modern organizations now manage an average of 200,000 digital identities, including 45,000 non-human identities spanning IoT devices, APIs, and automated workloads. This explosion of digital identities has created an attack surface that traditional security models cannot adequately protect, forcing a fundamental rethink of cybersecurity architectures.

2. Market growth drivers

• Passwordless authentication adoption will grow to 60% by 2026.

• Decentralized identity solutions are forecast to grow at 82% CAGR through 2027.

• AI in identity security is expected to drive $8.6B in spending by 2025.

The regulatory landscape has also become a significant market accelerator:

Prime technological subsets

Passwordless authentication

Password reliance remains a glaring vulnerability. Moving to passwordless authentication is a clear priority for enterprises. This increase is driven by improved user experience and enhanced security outcomes, attracting significant investment and adoption momentum. Vendors positioned in this space benefit from sticky, recurring revenue streams as enterprises implement long-term identity modernization programs.

Decentralized and self-sovereign identity

Decentralized identity solutions represent an emerging market segment with exponential growth potential. These platforms address growing privacy concerns and regulatory requirements for data sovereignty and user consent. 

While still early stage, investments here tap into evolving Web3 applications, government initiatives, and cross-border enterprise identity management — positioning companies to capitalize on a greenfield expansion.

Non-human and machine identity management

Enterprises now administer tens of thousands of non-human identities on average, including IoT devices, APIs, and automated processes. These accounts often have privileged access but lack visibility and governance, making them prime targets for attackers. 

Solutions delivering automation, credential lifecycle management, and audit visibility in this space are seeing rapid adoption and anticipate strong organic growth as companies scramble to close this critical security gap.

AI-driven identity analytics

As we saw, artificial intelligence and machine learning investments within identity security are skyrocketing. AI-powered platforms enhance threat detection by continuously monitoring user behavior and access patterns, enabling adaptive risk-based authentication and response. 

Cloud-Native Identity Governance and Access Management

As legacy IAM systems reach end-of-life, enterprises are migrating toward cloud-native identity governance frameworks that automate compliance and enforce least privilege access across hybrid environments. Managed governance solutions that can scale dynamically and integrate deeply into enterprise workflows are becoming indispensable—offering scalable, SaaS-based subscription revenue models with strong renewal rates.

Pioneering players in identity security

Some key players are attracting attention from both enterprises and investors with their targeted, scalable solutions. 

1. In the area of identity orchestration and modernization, Orchid Security is fast gaining traction by deploying large language models to unify and accelerate enterprise identity security tools, helping organizations reduce complexity and cost in sprawling hybrid environments.  

2. In the passwordless authentication space, newcomers like Hawcx are making waves with developer-friendly, platform-agnostic solutions that promise to resolve long-standing user experience barriers associated with passkeys and frictionless login, while established players such as Authsignal, FusionAuth, Trusona, and Keyless offer flexible, secure approaches that are enabling enterprises to transition away from passwords altogether.

In this new landscape, identity-centric cybersecurity solutions demonstrate several highly desirable business attributes. These include durable, recurring revenues; deep integration within enterprise workflows; and significant switching costs, which collectively reduce customer churn. The sector also remains fragmented, creating substantial opportunities for strategic acquisitions and platform building.

The bottom line 

We see the shift to identity-centric cybersecurity as the foundation of digital trust for the next decade. Sectors such as passwordless authentication, decentralized identity, machine identity management, AI-augmented analytics, and cloud-based governance are set for robust growth, fueled by persistent market demand and escalating regulatory pressures. Investors positioned in these domains stand to benefit as boards, regulators, and customers converge around the need for secure, resilient, and trustworthy digital ecosystems.