First Data Corp. expects to sign up more than 100,000 merchants by yearend to use its TransArmor payment card security system.
The Atlanta processor began testing TransArmor in March and formally rolled it out Sept. 1. It uses a combination of tokenization and encryption to secure transaction data as it passes through merchants' systems.
"The response from merchants interested in TransArmor has been enormous, Tim Horton, First Data's vice president of merchant product management, said by e-mail Friday. "Many of our customers have been waiting for the TransArmor [service] to become commercially available."
First Data, a unit of Kohlberg Kravis Roberts & Co., said pricing would vary by sales channel and merchant. The company would not specify prices.
Horton said the company will offer TransArmor to merchants of all sizes through its network of resale partners. "We have been educating the [independent sales organization] and agent channel on the benefits of TransArmor over the past several months, and they will be ready to sell the product to merchants by early November."
In June First Data completed a test of TransArmor that involved more than 150 merchants using a variety of point of sale terminals. It used the pilot program to test such factors as authorization time, which averaged less than a tenth of a second per transaction and ease of implementation.
Breakers Motel in Grand Isle, La., signed up for the pilot program in March, and said the system easily integrated into its POS systems. "Strong security can be a significant challenge to implement," said Anna Janise, the hotel's manager. "Adding the TransArmor service to our existing point of sale [system] required almost no effort on our part and didn't impact our business operations."
Market observers agree that protecting data as it flows to and from retailers' systems is important.
"The category of 'end-to-end' encryption is a relatively new category that everybody sees a need for — the retailers, processors and terminal manufacturers," said Gil Luria, a vice president of equity research at Wedbush Securities. He said VeriFone Systems Inc. was first out with such a product when it launched VeriShield Protect in 2008. "First Data is the first company to come out with a viable product to compete with VeriFone."
VeriFone declined to comment on First Data's product.
Securing 100,000 clients for the TransArmor product is a lofty goal, Luria said, and First Data could have a hard time convincing some retailers that they should invest in such security measures when they have not yet had a data security breach. "Some retailers think it's somebody else's problem," he said. "It depends on merchant adoption and the sense of urgency merchants have" to protect their transactions data, Luria said.
Still, with such high-profile breaches as those at Heartland Payment Systems Inc. in 2008 and TJX Cos. in 2007, data security is becoming a bigger priority for more retailers, Luria said.
"Some merchants still don't want to spend money on something that does not affect the bottom line in the short term," he said. "But as the market develops and we see more public cases of breaches, then there will be more of a sense of urgency."