Cloud computing is an upcoming technology that has been designed for commercial needs. One of the major issues in cloud computing is the difficulty to manage federated identities and the trust between the user and the service providers. This paper focuses on how security can be provided between the user and the service provider and how the user information can be authenticated. For the purpose of providing privacy and authentication, Security Assertion Markup Language (SAML) based Single Sign-On is used. Security is provided by using Hash based Encryption algorithm (HBE). HBE algorithm works with the help of Key Exchange Protocol which contains poly hash function. In the algorithm, Identity providers maintain user directory and authenticates user information; service provider provides the service to users. The user has to register their details with the identity provider prior to this. During this stage, Hash based Encryption algorithm is used to provide secure communication between the identity provider and the user. In this paper we suggest that higher security can be given to user login by using an additional cryptographic technique, i.e. Hash based Encryption algorithm with the help of the Key Exchange Protocol.