Ecommerce Payment Gateway Primer
Authorize.net
Authorize.net was founded in November 1996 and almost nine years later is synonymous with the word 'gateway'.
Fraud Prevention
Authorize.net offers a Fraud Detection Suite (FDS) which is a collection of tools and filters designed to isolate fraudulent transactions before you ship your product and are hit with a chargeback. Features included in FDS include an amount filter (set upper and lower bounds for acceptable sales), a velocity filter (limit the number of transactions received per hour), an address mismatch filter (used to detect when billing and shipping addresses are different), IP filter (isolates suspicious activity from one IP address), suspicious transaction filter (based on Authorize.net's own suspicious activity criteria), and IP blocking (block the IP addresses of known fraudsters).
Recurring Billing
The recurring billing feature offered by Authorize.net is very straightforward. Upon supplying a customer's credit card information, billing amount, payment interval, and length of subscription a recurring billing account is created. Once created no further interaction is required. The interval between charges can be any amount but only one charge can be run per credit card per batch.
eCheck Processing
Authorize.net's eCheck system is robust and full-featured. Covering its capabilities is an article onto itself. Any merchant who wishes to take advantage of eCheck processing would certainly find Authorize.net's solution to be an excellent choice.
Choice of APIs
One of the stronger features of Authorize.net is its choice of APIs. Unlike some gateways which charge different fees depending on how you choose to integrate them into your website, Authorize.net gives you the choice between two methods with no extra fees for choosing to use one over another. You can also switch between either method at any time and all features are available regardless of which method you choose to use.
The first method is the Simple Integration Method (SIM). SIM is the easiest method for integrating the Authorize.net gateway into a website with virtually no programming or SSL certificate required. The secure order page is hosted directly on Authorize.net's secure server. It can be customized to match your website's look and feel so your customers will feel like they are still on your website.
The second method is the Advanced Integration Method (AIM). AIM allows a programmer to make the checkout process completely seamless and transparent. The customer never leaves your website as the transaction is conducted server-to-server behind the scenes. You completely control the front-end ensuring your customers have the excellent experience you expect to provide.
Cost
Anyone who has been to the Authorize.net website will notice that they do not list pricing for their services. This is because Authorize.net does not sell its services directly to merchants. A merchant who wishes to utilize the Authorize.net payment gateway will need to contact one of the authorized resellers which can be found in their directory. As a result pricing will vary by reseller.
Since definitive pricing cannot be given, due to the fact that resellers can charge anything they want to, I'll give you the ranges that most pricing fall into with an average cost as well.
Set Up fee
Typically most resellers charge a setup fee to establish a new Authorize.net gateway although some do give it away in an attempt to board a merchant. This fee ranges from $25 - $300 with an average setup fee being $100. This usually does not include recurring billing or other value-added services. It is possible to get a reduced setup fee by paying more monthly. This is at the option of the reseller.
Monthly fee
Just like most merchant accounts charge a recurring monthly fee for your processing statements and merchant support, Authorize.net does the same. This fee ranges from $10 - $30 per month with the average being $15.
Transaction Fee
In addition to the transaction fee charged by your merchant account provider, Authorize.net will charge an additional transaction fee of their own. This fee will vary from 5¢ to 15¢ with 10¢ being average. However, some resellers have the ability to offer free transactions. Authorize.net rewards active resellers by allowing their merchants to process their first 250 transaction each month for free. Considering that most merchants do not do that kind of volume they essentially avoid this fee.
Recurring Billing
The recurring billing feature offered by Authorize.net is not a standard feature and does incur an additional cost. For merchants who require this service there is both a set up fee and monthly recurring fee for this service. The setup fee will range from $40 - $100 with $50 being average. The monthly fee will range from $20 - $40 with $30 being average.
Fraud Detection Suite
The Fraud Detection Suite offered by Authorize.net is not a standard feature and does incur an additional cost. There is a standard setup fee and a recurring fee as well. The setup fee ranges in cost from $25 - $50 with $40 being average. The monthly cost will vary depending on volume. If your business conducts 100 transactions or less each month your cost will range from $8 - $20 with $13 being average. If your business conducts 101 - 1000 transactions your cost will range from $15 - $50 with $30 being average. If your business conducts over 1,000 transactions in a month you'll be looking at a range of $50 - $150 per month with $100 being average.
eCheck
eCheck services through Authorize.net are handled differently then their other services. Pricing is not set by resellers. However pricing will still vary from merchant to merchant as Authorize.net sets it rates on a case-by-case basis with fees being determined by the risk associated with the account. However, most merchants typically pay a $49 application fee and if approved a $100 setup fee. Each check process will cost 1.75% of the check's face value plus 30¢ per transaction. There is no monthly fee but $10 monthly minimum does apply.
Although Authorize.net resellers can charge virtually any price they wish, pricing for Authorize.net gateways and services remain relatively low. This is due to two reasons:
- Low buy rates - Authorize.net has excellent buy rates from which resellers can mark up their services.
- Competition - So many companies resell Authorize.net's services that pricing needs to remain low or they risk losing their potential merchant to a competitor (which are easy to find thanks to the large number of Authorize.net resellers).
The features offered through Authorize.net (recurring billing, fraud detection, and eCheck) cover the needs of virtually every merchant. This eliminates the need to implement third party solutions and keeps managing the services easy as it is all in one place.
Authorize.net does not consider one form of integration superior to another and thus offers both to its customers. New webmasters will find this particularly attractive as they may not yet have the programming skills to implement the Authorize.net gateway through its available API but would like to do so in the future when they acquire those skills.
Authorize.net's popularity very much benefits many of its users. If you look at the features offered by most shopping carts currently available almost every single one offers built in support for Authorize.net right out of the box. In fact, many shopping cart and ecommerce solutions list their support of Authorize.net as a feature of their software. This means unless you are writing a custom shopping cart for your website, you don't have to worry about integrating your Authorize.net gateway. It's already been done for you. If you have chosen to write your own custom shopping cart, many developers have released the source code to accessing Authorize.net's AIM API which makes application development much quicker and easier.
WeaknessesAs popular as Authorize.net's services are, it is not because they are perfect. Being the largest payment gateway provider does have its downsides. The first notable issue is that pricing can vary tremendously from one reseller to another. If your goal is to get the lowest rates possible you'll need to shop around quite a bit before you can be comfortable with the offers you've received. Unfortunately you will also be inundated with merchant account offers as the vast majority of resellers are also very interested in landing the lucrative merchant account as well. Some will even refuse to establish a gateway for you unless you use their merchant services.
As the largest payment gateway provider Authorize.net is a logical choice for hackers to target. In September 2004 Authorize.net was the target of a Distributed Denial of Service attack (DDoS) that lasted for almost a full week causing some merchants to be unable to process sales and others from being able to sign up for new services. It wasn't the first attack Authorize.net has experienced and most likely won't be the last. Granted, it could have been any business (2checkout.com was attacked at the same time), but being number one in the payment gateway industry also means being number one on a hacker's hit list.
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