I received an invitation for an IT security fair (https://www.it-sa.de/en).

They additionally delivered a password "Kryptonizer". That is a little card to hang on your keychain with the following (example values, my translation):

It is often too easy for hackers to acquire personal information. The reason: Passwords that we can easily remember aren't cryptic. They are often common names or words like "Snowden" or "Admin". This card tries to fix this by making easy to remember passwords crpytic.

Input Start ABC DEF GHI JKL MNO PQRS TUV WXYZ
Output 4uR=? x 1 F 3 Y i # 9

Original version in german:

Hintergrund: Passwort-Hackern wird der Zugang zu persönlichen Daten im
Internet häufig viel zu leicht gemacht. Der Grund liegt auf der Hand:
Passwörter, die wir uns merken können, sind meistens nicht besonders
kryptisch, sondern orientieren sich an gängigen Namen oder Wörtern wie
"Snowden" oder "Admin".

Everything from the output is random for every single card (66 different characters to choose from). Now we have to choose an "easy" password (they recommend at least 8 characters):

Input: HELLOWORLD
Output: 4uR=?F133Y9Yi31

They also recommend to use this card for only one password and change it, if you lose the card.

Is this password scheme good? It comes from a big security fair with many experts.

My novice guess is, that you have a reduced entropy because of only 8 different characters (+ 1 start sequence), but as long as your card stays unknown, the attacker can't exploit this fact.

Full disclosure: I work for a company, which distributes such cards. This answer however is my own personal opinion of them.

The idea of these cards is that some users are just really bad at remembering passwords or pass phrases. The naïve approach would be to tell users "Just get better at remembering passwords", but experience has shown that such advice is counter-productive with some users.

Their memory seems to be hard-wired to only recall simple words, which probably have something to do with their work. So somebody working in a car factory may remember a word such as Engine.

Engine, of course, is a terrible password - both in length and entropy. So the "Kryptonizer" or similarly named cards try to add both of those.

Length is added by the prefix, 4uR=? in this case. It immediately increases the password length by 5 characters, bumping a 6 character password up to an 11 character password. Not perfect, but an improvement.

Entropy is added by substituting each character with a randomly chosen character. Not exactly a 1:1 substitution, but close enough. Since each card is unique, one can't build a pre-made rule on how to mangle each dictionary phrase.

In this example, Engine would turn into 4uR=?1YFFY1. Is this a good password? Probably not great, but certainly a lot better than Engine.

Problems with this scheme

Of course, it's not a perfect system. A good passphrase can't be replaced by a little paper card. Since three input characters map to one output character, the resulting password loses entropy instead of gaining it. The net entropy gain is that attackers can't use dictionary attacks as easily anymore. In order to do that, they would need to gain access to the mapping or perform an exhaustive search. If an attacker knows that such a card was used, they can use this to their advantage to speed up an exhaustive search.

Furthermore, users are expected to keep their card around, and many will probably leave it on their desk, under their keyboard or in similar bad locations. If they lose their card, they will probably lose their password too. They will need a new card, and change their password as well, which is not that good for usability.

Summary

So, is this a good system? Ultimately, I would say you have to judge it in the context of what it is designed to do. It's an aid for a specific group of users, who would otherwise use ungodly terrible passwords. And helping users choose marginally better passwords for a negligible cost is a good thing, in my opinion. Of course, it is not a silver bullet that magically solves the problem of credential storage and generation.

If possible, always use a password manager, let it generate long, high-entropy passwords and store them for you in a safe manner.

If this is not possible (e.g. for OS logins), I recommend either using Diceware or creating a long, nonsensical sentence, such as TheGreenLightFromOurEyesShinesThroughTheMirrorOfTime.. Just ensure that such a sentence isn't taken from a book or movie.

It's always depends on what you compare it with! What is the realistic alternative, that users would actually use, to using this card?

Clearly, 4uR=?F133Y9Yi31 is a much better password than HELLOWORLD. If you are giving this card to a non-techie whos not going to pick good passwords or use a password manager anyway, then it's an improvement.

On the other hand, using this system is much worse than just picking a random 16 letter password that you'll never remember and storing it in your password manager. An attacker who knows what letters there are on the card (e.g. by looking at leaked passwords from the same user) could easily crack it - suddenly it is only 40 bits of entropy!

So is this a good idea for people who might use a password manager? No, absolutely not. For your grandpa? Maybe! Don't let perfect be the enemy of the good.