Masking or substring data while replicating data
Yes, you can use custom replication stored procedures to do this.  Custom replication stored procedures are especially useful when an application requires custom logic such as this and can allow the data to be transformed in-flight to Subscribers.

Have a look at the sections Default and custom stored procedures and Considerations for Using Custom Stored Procedures in Specify How Changes Are Propagated for Transactional Articles, and the section To generate and use custom stored procedures in Set the Propagation Method for Data Changes to Transactional Articles.