How Do Password Managers Work?

Password managers serve as the cornerstone of modern digital security strategies, providing a systematic approach to the complex challenge of credential management. These specialized applications offer a centralized repository for storing authentication credentials while implementing robust encryption protocols to safeguard sensitive information from unauthorized access.

What Is a Password Manager?

A password manager is a tool that stores and manages your passwords for you. It helps you create strong and unique passwords for your online accounts and saves them in a secure vault. You can then access your passwords with a single master password or a biometric authentication, such as your fingerprint or face. Third-party password managers, unlike those native to your browser, provide extensions for all major browsers and apps for iOS and Android, so you're never stuck without your passwords. 

A password manager can autofill the username/password fields on websites you use, saving you time. It also syncs your passwords across your devices to access them from anywhere. Password managers designed for businesses provide relevant features, such as password sharing, the ability to give employees access to different folders of passwords, password auditing, and more.

Password managers are especially useful for businesses that manage multiple passwords for different apps, services, and users. They can help you improve your security, productivity, and collaboration.

How Password Managers Work

For Non-Technical Users

Think of a password manager as a secure vault with a single master key. Here's how it works in everyday terms:

When you create an account with a password manager, you establish one strong master password—the only one you'll need to remember. This master password works like a special key that unlocks your digital vault where all your other passwords are stored.

Inside this vault, the password manager keeps a record of all your website usernames, passwords, and often other information like security questions or notes. When you visit a website that requires login credentials, the password manager recognizes the site and can automatically fill in your username and password—no typing or remembering required.

What makes this system secure is that your password vault doesn't actually store your passwords in a readable format. Instead, it scrambles them using advanced mathematics so that even if someone gained access to your vault file, they couldn't read your passwords without your master password. Only when you enter your master password does the system temporarily unscramble the information to use it.

Most password managers also include helpful tools to create strong, random passwords when you sign up for new accounts, so you no longer need to invent passwords yourself. These generated passwords are typically long strings of random characters that would be impossible to guess—and impossible to remember, which is why the password manager stores them for you.

For Technical Users

Password managers implement a security architecture centered around cryptographic principles, specifically focusing on encrypted storage and zero-knowledge proof systems. Here's the technical implementation:

At its core, a password manager employs strong encryption algorithms (typically AES-256) to secure the password database. The encryption/decryption key is derived from the user's master password through a key derivation function such as PBKDF2, Argon2, or Scrypt. These functions apply multiple rounds of cryptographic operations with added salt values to transform the master password into an encryption key, making brute force attacks computationally prohibitive.

The password database itself—often called the vault—stores credentials in an encrypted format where each entry contains multiple fields (website URL, username, password, notes) encrypted independently. Modern password managers implement envelope encryption where individual entries are encrypted with unique data encryption keys (DEKs), which are themselves encrypted with a key encryption key (KEK) derived from the master password.

Authentication to the password manager follows zero-knowledge principles, meaning the service provider never receives or stores the master password in its original form. Instead, authentication typically involves:

1. Client-side key derivation from the master password
2. Creation of an authentication hash that proves knowledge of the master password without revealing it
3. Server verification of this authentication proof against a stored verification hash

For browser integration, password managers implement browser extensions that communicate with the core application through a local API. These extensions handle:

• DOM parsing to identify login forms
• Form field auto-population via DOM manipulation
• Capture of new credentials during account creation
• Secure communication with the main password manager application

For cloud-based password managers, synchronization involves encrypted vault transmission where only the encrypted data—never the encryption keys—traverses the network. This approach ensures that even if the service provider's servers were compromised, the attacker would only obtain encrypted data without the means to decrypt it.

Enterprise-grade password managers extend this architecture with additional features like:

• Role-based access control for password sharing
• Cryptographic implementation of secret sharing for emergency access
• Hardware security module (HSM) integration for master key protection
• SAML/OIDC integration for single sign-on capabilities
• Audit logging with cryptographic verification

This robust security model ensures that the password manager provides high assurance protection while remaining computationally efficient enough for everyday use across multiple devices and platforms.

Why Are Password Managers Important?

Password managers are important because they can help you improve your online security and convenience. Here are some of the key benefits of using a password manager:

• You can create strong passwords: A strong password is one that is long, complex, unique, and hard to guess. A weak password is one that is short, simple, common, or predictable. Weak passwords are easy for hackers to crack or steal, while strong passwords are not. A password manager can help you create strong passwords for each of your accounts and save them for you.
• You don’t have to remember multiple passwords: Remembering multiple passwords can be challenging and frustrating. You may end up forgetting or mixing up your passwords, or writing them down somewhere insecure. A password manager can help you avoid these problems by remembering all your passwords for you. You just need to remember one master password or use your biometric authentication.
• You can log in faster and easier: Typing or copying and pasting passwords can be tedious and time-consuming. You may also make mistakes or encounter errors. A password manager can help you log in faster and easier by autofilling your passwords for you. You can also use browser extensions or mobile apps to access your passwords with one click or tap.
• You can protect your data from hackers: Hackers often use various methods to steal or crack your passwords, such as phishing scams, brute force attacks, keyloggers, malware, etc. If they succeed, they can access your data, accounts, or devices and cause damage or harm. A password manager can help you protect your data from hackers by encrypting and storing your passwords securely. It can also alert you if any of your passwords are compromised or reused.
• You can share passwords securely: Sharing passwords can be risky and complicated. You may expose your passwords to unauthorized people or lose track of who has access to what. A password manager can help you share passwords securely with your team members or colleagues. You can control who has access to what passwords and revoke access at any time.

How to Get Started With a Password Manager

Getting started with a password manager is easy and simple. Here are the steps you can take to start using a password manager for your business:

• Choose a password manager tool: There are many password manager tools available on the market, but not all of them are suitable for businesses. You should choose a tool that meets your needs and preferences in terms of features, security, pricing, support, etc. We’ll recommend some of the best password managers for businesses later in this post.
• Create a strong master password: Once you choose a password manager tool, you need to create an account with it and choose a strong master password. This master password is the key to your vault and your passwords, so make sure it’s long, complex, unique, and hard to guess. You should also enable two-factor authentication (2FA) for your account, which adds an extra layer of security by requiring a code or a device in addition to your master password.
• Log into your important accounts using the password manager: The next step is to log into your important online accounts using the password manager. The password manager will capture and save your passwords for you. You can also use the password manager to create new passwords for your accounts or change your existing passwords if they are weak or reused. You should aim to have a strong and unique password for each of your accounts.
• Implement security measures such as two-factor authentication: Besides using a password manager, you should also implement other security measures to protect your accounts and data. One of the most effective measures is two-factor authentication (2FA), which we mentioned earlier. 2FA requires you to enter a code or use a device in addition to your password when logging in to an account. This way, even if someone steals or guesses your password, they won’t be able to access your account without the second factor. You should enable 2FA for all your online accounts that support it, especially those that handle sensitive data or transactions.

5 Password Managers to Consider for Your Business

Now that you know how password managers work and why they are important, you may be wondering which password manager tool to choose for your business. There are many options available, but not all of them are equally reliable, secure, or user-friendly.

To help you make an informed decision, we’ve compiled a list of five password managers that we think are worth considering for your business. We’ve also highlighted their key features and benefits, as well as their pricing and support.

1. TeamPassword

TeamPassword is a password manager designed specifically for teams and businesses. It allows you to store and share passwords with your colleagues easily and safely. 

One special thing about TeamPassword is its easy-to-use design. It makes it simple to find your way around the tool. This not only makes it easier to use every day, but it also makes it easy to get started when new team members join.

TeamPassword is a tool that gives you what you need without any extra stuff. They offer discounts to nonprofits and live customer support via chat. Check out their pricing here. 

Here are some of the features of TeamPassword:

• Easy access: With browser plugins and mobile applications, TeamPassword is easy to log into from any device.
• Simple interface: Intuitive design and controls ensure users of all tech skill can easily access passwords.
• Sharing passwords: You can easily share passwords with your team or specific groups with just a few clicks. And if you need to limit access, you can do that quickly too.
• Password generator: TeamPassword can create strong and secure passwords for you automatically.
• Security features: TeamPassword takes security seriously. It offers extra protection like two-step verification and industry-standard AES 256-bit encryption to keep your passwords safe.

2. Keeper

Keeper is a password manager that puts a strong emphasis on providing detailed administrative insights and controls. It is specifically built to assist individuals and businesses in safeguarding their digital identities and ensuring the security of their online activities. Key features promoted by Keeper include robust role-based enforcement policies, delegated administration, comprehensive reporting on password activity, and event logging for over 140 event types.

In addition to its rich set of features, Keeper offers a fully-featured desktop application, which may be particularly appealing to certain users. Furthermore, there is an optional Secrets Management service available as an add-on.

While Keeper doesn't offer a free plan for personal use, its business plans are competitively priced, allowing businesses to benefit from its offerings at affordable rates.

For Keeper alternatives, click here. 

Keeper features:

• Manage and share passwords - Set up shared team folders and restrict who can add, remove, modify, and share records.
• Access to remote infrastructure - Enable employees to access sensitive internal resources with zero-trust network access from anywhere, on any device, with no VPN.
• Manage secrets - Remove hard-coded credentials from source code, configuration files, and continuous integration/continuous deployment systems.

3. Dashlane

If you’re looking for a popular and powerful password manager, you might want to try Dashlane. You can store, autofill, and share your passwords with confidence.

One of the coolest things about Dashlane is that it can change your passwords for you on many websites. This feature, called “Password Changer,” lets you update your passwords quickly and conveniently. You don’t have to waste time logging in and out of different platforms. Just click a few buttons and enjoy better security.

Dashlane also helps you create strong passwords that are hard to crack. It has a smart password generator that mixes letters, numbers, and symbols. By using complex passwords, Dashlane protects your accounts from hackers.

Dashlane has a simple and intuitive interface that makes it easy to use and manage your passwords. You can also access your passwords from any device with its browser extensions and mobile apps.

To find out more about Dashlane and how it compares to NordPass, read this blog post.

Here are some of the features offered by Dashlane:

• Password changer: With this feature, you can easily update your passwords on supported websites automatically, saving you time and effort.
• Dark web monitoring: Dashlane actively scans the dark web for compromised information and sends alerts if any of your data is discovered.
• Secured note: You can securely store sensitive information such as passport numbers or confidential business details within the app and choose to grant access only to trusted individuals.

4. NordPass

NordPass is a password manager created by the same team behind NordVPN. It's designed to be simple, secure, and user-friendly, making it easy to manage your passwords.

One standout feature of NordPass is its zero-knowledge architecture. This means that your passwords are encrypted and decrypted directly on your device, keeping them secure and ensuring that NordPass doesn't have access to them. This approach greatly reduces the risk of data breaches and unauthorized access to your accounts.

NordPass includes a password generator that can create strong and unique passwords for all your online accounts. It also offers browser extensions and mobile apps, allowing you to access your passwords conveniently across different devices.

Explore other options similar to NordPass by reading more here.

NordPass features:

• Unlimited password, credit card, and note storage: There's no storage limit to the number of passwords or other data you can store in your vault.
• Data breach scanner: The scanner alerts you when emails or passwords have been found in a data breach.
• Multi-factor authenticator: NordPass uses time-based one-time password (TOTP) and universal two-factor (U2F) authentication to secure your data.

5. Bitwarden

Bitwarden is a password manager that stands out for its security, affordability, and compatibility across different platforms. It's an open-source tool that emphasizes transparency and privacy, making it popular among users who prioritize these aspects.

With Bitwarden, your passwords are stored in an encrypted vault, ensuring their safety. The tool also provides multi-factor authentication options, adding an extra layer of security to your accounts.

One great thing about Bitwarden is its affordability. While there is a free version with essential features, the premium version offers additional functionalities like secure file storage and priority customer support at a reasonable price.

If you're interested in exploring other password management options similar to Bitwarden, you can find informative recommendations and alternatives in this blog post.

Bitwarden features:

• Bitwarden Send: This feature allows you to share encrypted information with another person, like passwords or credit card details, and set a self-destruct timer for it.
• Secure Notes: This feature serves as secure storage for other types of information that are not passwords.
• Vault health reports: These reports analyze the strength and security of your passwords and provide a score for each one. Using this data, you can mitigate future security concerns involving passwords.

Try TeamPassword Today

Having a strong and unique password for each online account is crucial for safeguarding your security and privacy. That's where a password manager comes in handy. It allows you to create, store, and utilize strong passwords, protecting them from hackers and identity thieves. Additionally, a password manager provides a secure space to store sensitive information, syncs passwords across devices, facilitates managing shared accounts, and helps you steer clear of phishing sites.

TeamPassword is a password manager specifically designed to meet the needs of teams and businesses. With TeamPassword, you can securely and efficiently share and manage passwords. It enables you to generate strong passwords, store them in a secure vault, automatically fill them on websites, share them with team members, monitor their security, and much more.

To experience the benefits of TeamPassword firsthand, you can sign up for a free trial today. See for yourself how it can enhance your online security and productivity.