Authentication-As-A-Service (AAAS) Market is expected to grow at a 15.79% CAGR, achieving USD 6.713 billion by 2030 from USD 3.225 billion in 2025.
Authentication-as-a-Service (AaaS) is a type of cloud-based service that provides authentication capabilities by outsourcing user authentication management and authorization of an enterprise to a third-party provider, who provides a range of authentication services to the enterprise's users. AaaS solutions offer a range of authentication methods, including username and password, multi-factor authentication (MFA), biometric authentication, and social login, to ensure that only authorized users can access an organization's applications and data. They can monitor user behaviour in real-time and detect suspicious activity, such as logins from unfamiliar devices or locations. They are majorly provided on a subscription basis to companies by offering monthly fee payments for the authentication services, which reduces the cost and complexity of authentication infrastructure management for companies while simultaneously providing them with enhanced flexibility and scalability. The significant factors promoting the expansion of the AaaS market are the improvement in security posture, simplifying the authentication process for users, and compliance with regulatory requirements related to authentication and access control.
The rise in cloud adoption rate fueled by the increase in companies extending their applications and data to the cloud is creating a need for secure and convenient authentication solutions to be integrated with such cloud-based applications. According to the World Economic Forum, approximately 65% of corporate businesses worldwide are evolving their business structures to incorporate cloud computing. In addition, Flexera projected that the IT sector's expenditure on cloud infrastructure rose by 40%, leading to a 51% increase in the usage of hybrid cloud networks compared to 2021, resulting in more than 58% of businesses using hybrid cloud platforms in 2022. AaaS solutions offer a range of solutions that can be conveniently deployed in cloud environments, including single sign-on (SSO), multi-factor authentication (MFA), and user provisioning and management.
The rise in the number of data breaches and cyber-attack incidents results in security concerns among companies operating in all sectors, encouraging companies to incur expenditure for adopting authentication and identity management solutions to fortify their security levels. For instance, on September 11, 2022, a data breach incident allowed unauthorized access to the personal data of approximately 50,150 Revolut members due to an external party obtaining access to the database of a start-up company providing financial technology services, Revolut. In addition, leading companies like Zoom and Twitter witnessed breaches in their respective data in 2020. In July 2022, personal details such as phone numbers and mail addresses of approximately 5.4 million Twitter users were breached and leaked.
Cybercriminals have intensified their activities since the pandemic by causing a 350% increase in phishing websites in 2020, and the consequent losses from shopping fraud amounted to US$20.8 million between 2020 and 2021. According to a report generated by Verizon on Data Breach Investigations in 2020, hackers possess all the necessary tools and technology to execute account takeover attempts and other types of fraud due to the circulation of more than 15 billion credentials on the dark web. The growing security concerns are expected to drive the demand for AaaS products or solutions to aid organizations in securing access to their systems and data by simultaneously simplifying user authentication.
The AaaS market is dominantly fragmented due to several companies' variations in product offerings consisting of different authentication methods, protocols, and features. The lack of standardization makes it difficult for enterprises to compare and evaluate different solutions, limiting their extensive adoption across different companies, driven by the uncertainties among companies, leading to their unwillingness to entrust their authentication infrastructure to a third-party provider.
The regulatory requirements established in the healthcare and BFSI sectors driven by their access to sensitive and confidential user data mandate the employment of strong authentication and access controls, providing an opportunity for usage of AaaS solutions since they assist enterprises to meet these requirements by delivering advanced authentication features such as biometric authentication and real-time threat detection.
The AaaS market in the region is witnessing high demand driven by the expansion of the IT industry, increased adoption rates for cloud-based applications, and the rising importance of cybersecurity and data privacy. Further, the presence of leading BFSI, healthcare, and retail companies in the region will develop the AaaS market. For instance, a report published by OneSpan, a leading company operating in the AaaS market, demonstrated how the adoption of cloud-based authentication features by a Japanese bank helped enhance its mobile banking application through the installation of in-app OTPs and fingerprint biometrics. Further, the massive growth in the e-commerce sector in the region stimulates the demand for effective identity management, access control systems, and authentication strategies to prevent fraudulent activities, which can be fulfilled by the application of AaaS solutions.
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