Heartland Payment Systems Reports Quarterly Loss

Breach Expenses Mount; CEO Optimistic About Encryption Solution
Heartland Payment Systems Reports Quarterly Loss
Just over one year after its announcement of a devastating data breach, Heartland Payment Systems reports encouraging progress in merchant transaction processing volume and same store sales.

The company is close to returning to normalized operations, said Robert Carr, the company's chairman and CEO, in Heartland's most recent quarterly earnings call. The payments processor reported a net loss of $9.6 million in the fourth quarter, largely due to expenses from its data breach -- the largest-ever reported loss of credit card data, estimated at 130 million cards. Revenue grew by 5 percent to $105.1 million, up from 1 percent growth in the third quarter.

Expenses from the 2008 network data breach totaled $23.7 million, including charges tied to recent settlement charges.

Heartland reached a settlement with Visa in January and agreed to pay $60 million to issuers of Visa cards for expenses caused by the breach.

Earlier, Heartland settled with American Express for $3.6 million.

Even with the press coverage and subsequent negative publicity from the intrusion, the number of Heartland clients that did not renew contracts grew just 0.1% in 2009, Carr notes.

Security will continue to be of interest, Carr says, with the company's E3 encryption offering being run by a "number of merchants." Carr says the company is waiting for delivery of several thousand units of the encryption device sometime in the second quarter.

He says Heartland will recover the costs of the devices and add more merchants to protect card data. By using the same technology as pin debit, the data will stay secure. "There is no known loss from this technology for a merchant," says Carr. "It will be a great solution until the U.S. moves to chip and pin in five-to-10 years," he adds "The E3 product represents a catch-up game for the rest of the industry."

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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