Authorize.net (AuthNet) Gateway: What It Is and How It Works for Businesses

Today, the Authorize.net (AuthNet) payment gateway has more than 445,000 merchants. Since 1996, the AuthNet gateway has helped companies around the world with online, offline, and in-person sales. From advanced fraud detection to a convenient member dashboard, it offers a number of useful benefits for businesses.

What is Authorize.Net? And does it have options for high-risk merchants? Read on to find out more.

TL;DR

• AuthNet has served customers for almost three decades. Currently, it works with more than 445,000 clients.
• With this payment gateway, businesses can get support for credit cards, debit cards, eChecks, and mobile wallets.
• This payment gateway is the nexus that connects the merchant, payment processor, customer, and the customer’s bank.
• Some of the best Authorize.net features include a merchant dashboard, customer information management (CIM), recurring billing tools, payment links, and a virtual terminal.
• With the Advanced Fraud Detection Suite (AFDS), businesses can filter out high-risk transactions and prevent chargebacks.
• By working with Authorize.net, companies can enjoy a partner that offers reliable services and excellent uptime.
• Setting up the platform can be challenging. Because merchants typically have to find their own merchant account provider and payment processor, setup can be especially complex.
• While a standard plan is available for general services, Authorize.net fees can quickly add up.
• Because of coordination with third parties and underwriting requirements, the onboarding process can be slow.

Before signing up for an account with Authorize.net, merchants should investigate more modern, flexible Authorize.net alternatives.

What Is Authorize.net? 

Authorize.net is a payment gateway that allows businesses to process online, offline, and in-person transactions. 

This payment gateway accepts credit cards, debit cards, PayPal, Apple Pay, and a range of payment types. The Authorize.net payment gateway also offers the convenience of eChecks for United States customers. With this payment option, customers can use their bank accounts to send a digital check to your business.

How AuthNet Works 

The AuthNet gateway is basically an intermediary between your business and the customer’s bank. When the customer presents their payment method, an entire network of hidden steps unfolds to carry out the payment.

1. The cardholder presents their payment method to the merchant.
2. To ensure the information remains secure, it is tokenized.
3. Then, this information is relayed to Authorize.net.
4. At this stage, Authorize.net validates the request. If there are additional fraud checks or authentication measures required, they will be implemented at this point.
5. Then, Authorize.net forwards the request to the processor or acquirer.
6. The processor or acquirer relays the request to the card network.
7. Next, the card network sends the request to the issuing bank, which is also known as the customer’s bank.
8. The issuer can choose to approve or decline the transaction before sending it back to Authorize.net.
9. All of the funds end up settling in a batch later. 
10. Afterward, the funds are deposited into your merchant account.

How the AuthNet Gateway Supports Modern Businesses

AuthNet’s features support modern businesses through a multi-channel, multi-payment approach. Credit cards, eChecks, mobile wallets, and other payments are accepted online and offline.

With customer information management (CIM) tools, businesses can easily manage customer data and set up recurring payments. Meanwhile, advanced fraud detection tools are essential for preventing fraud and chargebacks. From enhanced security to a comprehensive merchant dashboard, AuthNet makes handling customer payments as easy as possible.

The Key Features of the Authorize.net Gateway

If you’re trying to decide between different payment gateways, it’s important to understand what each gateway has to offer. The following Authorize.net features are some of the main reasons companies decide to work with this payment gateway.

Merchant Dashboard

When you need to manage your merchant account or customer payments, the merchant dashboard is the place to go. This location is the nexus for all of your transaction monitoring. You can configure user accounts to include different roles or set up recurring payments.

The dashboard was designed to be as user-friendly and easy to navigate as possible. Because of how it’s designed, it’s easy to make repeat payments and update client information.

Recurring Payments and Subscriptions

One of the most important things about the Authorize.net payment gateway is its ability to set up and manage recurring payments and subscriptions. Many subscription-based businesses struggle with their chargeback rates, so it’s essential to have a gateway that understands the risks involved.

With the AuthNet gateway, you can set a trial length or billing interval. It uses tokenized payment information, so you don’t have to store the customer’s number on file. When customers need to pay their recurring bill again, the payment can automatically take place. 

Payment Links

When comparing Authorize.net and its alternatives, there are a few features that clearly stand out. With AuthNet, you get convenient features, like payment links, that help you process transactions. Payment links can be sent via SMS, emailed in a newsletter, posted on social media, or embedded on your website. 

Once the links are set up, customers can click on the link and submit their payment. This convenient process allows your business to receive payments without having an entire e-commerce setup.

Advanced Fraud Detection

AuthNet is equipped with an Advanced Fraud Detection Suite (AFDS), which prevents chargebacks and fraud. This suite can flag and hold suspicious transactions. Within the AFDS, you can filter out specific customer locations, IP addresses, and other risk indicators.

Customer Information Management (CIM)

CIM systems are an essential part of payment gateways. With these systems, customer information can be stored for future transactions. Because the information is tokenized, the data is protected from cyber attackers.

Virtual Terminals

Virtual terminals are useful for any situation where the merchant needs to take an order online or via phone. It allows you to process credit cards, eChecks, and other payment methods without needing a physical terminal. Because of this, it is an incredibly effective tool for remote companies and any business that doesn’t operate in a traditional retail setting.

How Does the Authorize.net Gateway Work?

With the AuthNet gateway, information is transmitted between your customers, your business, and any financial institutions involved in the transaction process. Data is tokenized and encrypted before it travels from the customer to the gateway. Then, AuthNet handles fraud checks and payment authorization.

From there, the information is relayed to the issuing bank. If the transaction is approved, the response is relayed through the network and financial institutions involved. Eventually, the customer’s payment transfers from their bank to the acquiring bank and into the merchant’s account.

You can think of AuthNet as the central hub in the transaction process. It has to send payment requests, check for inconsistencies, and conduct fraud checks. It securely manages all of these encryption, authentication, and communication activities in the background. By doing so, it converts complicated financial processes into a simple day-to-day part of running your operations.

The Advantages of Using Authorize.net as a Payment Gateway

Before signing up for all of Authorize.net’s fees, it’s essential to understand the main benefits and drawbacks associated with this payment gateway.

Multiple Payment Options

One of the major advantages of working with AuthNet’s payment gateway is its ability to take multiple types of payment options. Customers can pay with credit cards, debit cards, digital wallets, and eChecks. Plus, its gateway and virtual terminal make it easy to process payments from multiple channels.

Strong Security and Fraud Protection

Over the years, AuthNet has built a reputation for its superior level of security and fraud prevention. It features PCI-compliant data handling, tokenization, and encryption. 

Plus, AFDS lets you create customized rules that are specific to your business. Through this added layer, you can ensure a heightened level of protection from fraudulent transactions. 

Reliability 

AuthNet isn’t a fly-by-night company that just opened up shop. It began its original operations around 30 years ago, so it understands what merchants need to be successful. Since then, it has developed a reputation for dependable reporting and settlement. 

Whether you want real-time reporting tools or predictable payouts, AuthNet is available to help businesses achieve a consistent cash flow. By using this payment gateway, you can easily process payments without worrying about the hassle of disrupted revenue and payout delays.

Subscription Tools 

Authorize.net’s advanced capabilities make it easy to set up recurring payments and subscriptions for your customers. Information can be stored in a tokenized format, so you don’t have to worry about security issues. Through the subscription feature, you can manage customer billing details and set a billing timeline.

Often, these tools are especially useful for medical providers, gyms, fitness centers, and other service providers that have recurring billing cycles. Once the payments are set up, you can enjoy having a lower administrative workload, fewer labor expenses, and better customer retention.

The Limitations of Authorize.net

Although there are many advantages to working with this payment gateway, it’s also a good idea to consider Authorize.net alternatives as well. There are multiple limitations to using AuthNet’s payment gateway, so it may not be the right choice for everyone.

Challenging Setup

For merchants, AuthNet can be fairly complex to set up. Unlike many modern platforms, the merchant is generally responsible for configuring the gateway, setting up a merchant account, and finding a third-party payment processor to work with. 

Additionally, recurring billing features and advanced security measures require customization by the merchant. While many merchants could benefit from these features, they may be unable to take advantage of them because of the unnecessary complexity involved.

Not an All-In-One Processor

Today, there are all-in-one platforms that are fast and easy to set up. Unfortunately, AuthNet isn’t it. The customer has to find an outside payment processor and merchant account provider to work with. Even if you use the all-in-one package AuthNet advertises, they will simply find third parties to carry out these roles. 

Costly Add-on Services

While there are standard pricing options, you’ll have to pay more for any extras. These costs can quickly add up, so you should pay attention to the fine print and monitor your account statements.

Limited Features

Some of AuthNet’s competitors offer real-time machine-learning fraud prevention, subscription analytics, and state-of-the-art technology. While AuthNet has stable, reliable technology, there are more advanced features and tools available today.

Slow Onboarding Processes

Additionally, this payment gateway is known for having a fairly slow onboarding process. If you are in a rush for time, this gateway may not be a good choice. Before you can start processing payments, you have to undergo an underwriting process and a thorough risk analysis. AuthNet also has to work with a third-party payment processor, which takes extra time.

Who Is Authorize.net Best For?

While Authorize.Net’s features aren’t right for everyone, there are a few situations where it makes sense to use the Authorize.net payment gateway for your business.

• Businesses That Want To Use Multiple Payment Methods: AuthNet supports a range of payment types, such as debit cards, mobile wallets, and eChecks.
• Companies That Use a Subscription Model: Thanks to its recurring payment options, AuthNet is excellent for businesses that use a subscription model.
• Enterprises That Require Strong Fraud Protection: If you are looking for a business that provides high-level fraud protection, AuthNet is a good option.
• Contractors That Have Frequent Card-Not-Present Transactions: Freelancers, service companies, contractors, and B2B companies often use card-not-present transactions. Thanks to its virtual terminal, AuthNet can readily provide this kind of support.

Ultimately, any business that wants the stability that comes from excellent customer service, consistent uptime, and strong customer support will likely have a fairly good experience with AuthNet.

What Are Authorize.net’s Fees and Pricing?

On its website, Authorize.net advertises two standardized pricing plans. However, many add-on services cost extra, so it’s important to pay attention to all of the different Authorize.net fees. One pricing plan includes an all-in-one solution, which is when AuthNet selects the payment processor and merchant account provider for you. Meanwhile, the standard plan just uses AuthNet as a payment gateway.

If you have an existing merchant account, you’ll want to use the standard plan and have AuthNet as just your payment gateway. This plan costs $25 per month, plus 10¢ per transaction and 10¢ for your daily batch.

For an all-in-one solution, you’ll be charged $25 per month. On top of that, you’ll have to pay 2.9% of each transaction and a 30¢ flat fee per transaction.

How Is a Payment Processor Different From a Payment Gateway? 

When you’re trying to figure out your company’s payment processes, it can be confusing to sort through all of the different terms. At its heart, a payment processor is responsible for moving funds between the customer’s bank and your merchant account. 

If you ever accept a card-not-present or online transaction, you’ll need to use a payment gateway. A payment gateway is like a digital terminal that allows you to conduct transactions.

Some providers are able to perform both functions. While it’s becoming more common to have providers handle both roles, many payment gateways still rely on someone else to serve as the payment processor.

How PayCompass Delivers a Flexible, Modern Gateway Solution

If you’re looking for a flexible, modern payment gateway solution, PayCompass can help. We understand what companies need to handle their payments online and offline. 

During the initial consultation, we’ll talk to you about your company’s concerns and review your existing rates. Then, we can create a tailored payment plan that matches your exact needs. Through our next-gen payment solutions, you can achieve smart growth and ensure seamless transactions.

Final Thoughts

As one of the most established payment gateways on the market, the Authorize.net payment gateway has a lot going for it. It offers advanced security, recurring billing options, and tokenization tools. Because of these Authorize.net features, you can be confident about the safety of your customers’ financial data.

Unfortunately, there are also some major limitations to keep in mind. Many payment processors and gateways have a broader range of security features. Additionally, the AuthNet gateway uses third-party payment processors, which can lead to service issues. Worse still, the configuration and setup process can be incredibly complex for the average business owner to navigate on their own.

For all of these reasons, it’s a good idea to be cautious as you explore your gateway options. By reviewing pricing structures and services, you can ensure that your business finds the right payment gateway provider.

If you’re ready to learn more about your payment gateway and payment processor options, reach out to our team of experts today!