ACP-01301 outline - Autodesk Certified Professional Revit for Architectural Design Updated: 2023

While Autodesk has been ramping up elements of artificial intelligence (AI) in its construction and architectural/engineering design products for a while, a fresh complement of new AI tools came to market in Las Vegas at Autodesk University the week of November 13, 2023.

Autodesk offers a spectrum of software products for architects and engineers, extending workflows into construction with Autodesk Construction Cloud construction management and products including the Autodesk Build project management application.

About 12,000 Autodesk customers and partners were on hand for an event that kicked off with pounding house music and a light show, and proceeded into a rapid fire series of product announcements for construction and Autodesk’s other sectors. Front and center was the Autodesk AI initiative, which encompasses existing and emerging AI technologies.

Some of these, like Construction IQ which has applied AI to predict, prevent, and manage construction risks on more than 12,000 projects, have been in the market long before Autodesk University. But together with emerging releases announced at the event and trickled out in the weeks and months before, they signal Autodesk’s progression toward intelligent construction software.

• Autodesk Forma, the platform for early stage design, now harnesses AI to automate design for wind, noise and operational energy consumption during early planning.
• The new Machine Learning Deluge Tool brings to Autodesk’s InfoDrainage software product the ability to steer users toward optimal placement for retention ponds and swales.
• AutoCAD leverages AI to help users read handwritten and digital markups, determining the intent of the user and recommending context-aware actions to incorporate changes.

Presenters included Adam Tank, co-founder and chief customer officer for Transcend Software, a company in which Autodesk has invested. Transcend Design Generator is used by asset owners, engineering firms, and equipment suppliers to rapidly produce conceptual designs for infrastructure including water, wastewater and power.

More than AI

In a briefing for media prior to the event with Vice President of Industry and Portfolio Marketing Vikrum Dutt, investment priorities were built around business priorities rather than artificial intelligence.

These include:

• An open, interoperable, accessible and secure data strategy
• Development of Forma industry cloud for the AECO sector
• Interoperability agreements with Trimble, Nemetschek, Ansys and others

These priorities were evident at Autodesk University. Construction keynotes touched on recent significant, if incremental, functional improvements to Autodesk Construction Cloud that improve project communication and drive design data into the field. As covered by IRONPROS, these include:

• The Correspondence product, which aggregates email communication, harvesting project-related documents and correspondence directly from email clients like Outlook or Gmail.
• Model Quality Workflows that package data from design into construction-ready models. Using Model Quality Workflows, users can curate data to provide more relevant and usable ways for contractors to engage with it.
• Sheets Collection, which streamlines project document management inside Autodesk Construction Cloud and eliminating the need to create and own multiple projects or prefix sheet names for a single job. Sheets are accessible to teams in the office and field for larger multi-building projects. 
• Bridge for Closed RFIs, which will expand access to closed RFIs across projects or accounts using Autodesk Bridge. In the Tuesday Construction Keynote, we learned this will also encompass closed design packages, workshare models and as-builts.

AI is not new for Autodesk, and neither is a heavy focus on interoperability. But yet there was plenty of legitimate interoperability news on two fronts.

The first is internal to the Autodesk product suite. While Autodesk Construction Cloud is probably one of the more modern architectures in enterprise construction software, there is still enough room for improvement that Autodesk is announcing further investments here to get their own suite of products to work more seamlessly together.

Autodesk Docs, the common data environment running within Autodesk Construction Cloud, is becoming more central to the solution. Specifically, data in Autodesk Doc will be decoupled from the application where it was created so it can more freely move from one application to another.

In an announcement with broad implications, Autodesk also announced a new interoperability agreement with Trimble. According to an Autodesk release:

“The Trimble and Autodesk collaboration demonstrates their ongoing commitment to support open industry standards such as Industry Foundation Classes (IFC) and Construction Operations Building Information Exchange (COBie), and can enable current and prospective Autodesk and Trimble customers working on the same projects to work together seamlessly through optimized file compatibility across applications.

“Under the terms of agreement, Autodesk and Trimble will take steps to accelerate interoperability by exchanging Application Programming Interfaces (APIs) and developer tools to build and market interoperable products. This allows the two companies to improve upon existing data exchanges, as well as open up new workflows between their products. Tighter product-to-product integration can enable design and construction professionals to share models, project files and other data between select Autodesk and Trimble solutions both in the office and the field, and allow for the reuse of information during design and construction throughout all phases of the project.”

Interoperability Between Fabrication and the Field

As modern methods of construction including modular, offsite, volumetric and other prefabrication methods become popular, technology will be important if factories, contractors, owners and designers are to realize the efficiencies of these project delivery systems.

In these models, design for manufacturing and installation and field logistics are a challenge. Main stage content focused on the Oakland, Cal. Phoenix Project, a 316-unit affordable housing project by Factory OS and MBH Architects completed in about half the cost, time, and carbon footprint of a typical multi-family building in the San Francisco Bay Area.

According to Factory OS Vice President of Design Engineering Andrew Meagher, Autodesk technologies have streamlined this substantially.

“Six years ago, that would have been a question fraught with peril,” Meagher said when asked how the factor and field coordinated activities on the project. “If you have five GCs, you get seven opinions. Now, through all the years of working with our architect, we've built 27 projects, and we've got another dozen in in mid construction.”

Factory OS Vice President of Design Engineering Andrew Meagher in a residential module with enclosed, inspected panels ready for mechanical installation in the field.IRONPROS

The Autodesk tech stack, most notably Revit, is central to the process.

“We build the whole building in Revit in the factory, and then we collaborate in the cloud with the general contractor to make sure that the podium and the mods will land where they're supposed to land,” Meagher said. “There are embedded plates that are required in the on the concrete, that we have hold downs that get welded to it. So all of that gets coordinated. During the course of construction, our modules are done before the podium gets built. We're able to use our as-built as it were to coordinate that with the podium pretty similarly to doing bathroom pods for healthcare … We use Revit throughout our factory, and right now we’re using BIM 360.”

Overview

Autodesk Inc. (NASDAQ:ADSK), based in San Francisco, California, is a multinational software corporation specializing in software for 3D design and CAD (Computer-aided design) in various industries including architecture, engineering, manufacturing, and entertainment. Some of its most popular offerings include Autodesk Architecture, Engineering & Construction Collection (AEC), Autocad, Autocad LT, and BIM 360 Design. Despite Autodesk's relatively expensive valuation, the company's wide technological moat paired with new opportunities in AI products make it well-poised for future growth.

Dominant Market Share

Autodesk has the dominant hold on the market share of CAD products. The company's AutoCAD has been reported to have the biggest install base controlling 39.12% of the market. These products have grown the company's market share by 27.22% over 3 years. The dominance of the company provides Autodesk with industry security as it creates reliance on the product, increasing the necessity of the products and the longevity of the company.

The market size of 3D rendering software has been exponentially growing in the past couple of years. As the industry grows, there will be a growing reliance on 3D design and CAD products. With Autodesk's wide range of products and services, the company will be able to further provide products to assist businesses in various industries.

Strong Earnings Growth & Financials

Autodesk has seen steady earnings growth over time with operating cash flows increased by 24.1% YoY. This strong growth was driven by strength in existing products, such as AutoCAD and AutoCAD LT, growing 9%, AEC package revenue growing 14%, and the Media & Entertainment Collection revenue growing 10%. Autodesk has also seen extra revenue growth this quarter with the renewal of many three-year payment plans that started at the beginning of the Coronavirus lockdown.

Autodesk has introduced a new transaction model for Flex. This allows new customers to try new products with friction, allowing the company to better serve infrequent users. The new model has brought many new customers into the ecosystem, signing 3 million dollar deals in the past quarter. The company hopes that this will provide a more direct relationship with its customers and help integrate with its partners further. The company is preparing to open this translation model more broadly with plans to introduce the model in Australia later this year.

Additionally, in this quarter Autodesk has added Autodesk Construction Cloud to the Autodesk Architecture, Engineering & Construction Collection. The addition has made the program more successful and improved the workflow between its products. The addition has also pushed smaller companies to standardize on Autodesk Construction Cloud, creating more longevity for Autodesk's products.

We believe that this combination of existing product growth paired with new opportunities will continue to drive Autodesk's steady growth moving forward. This steady growth will assist the company in gaining further market share, which will cement it as a staple within the industry.

AI Potential

Autodesk has been using AI in many different ways across many of its products. The main AI processes used by the company are Design Automation, Computational Modeling, Generative Design, and Machine learning. When using Design Automation, the user can automate tasks by setting parameters and creating scripts. When using Computational Modeling, the user describes a process to create a desired outcome. This usage of AI is similar to Design Automation but can also evaluate the outcomes of the design. With Generative Design, the user can generate and evaluate multiple design alternatives based on the original input from the user. With Machine Learning the user states desired outcomes and the AI returns results based on past data.

Ultimately, with further development of AI in Autodesk's ecosystem, the company will be able to provide better workflow and a better experience to its customers. The increased workflow and user experience will keep recurring customers as well as draw new ones in, creating a sustainable business model for the company.

Valuation

We used Peter Lynch's Fair Value Models to determine Autodesk's valuation. For this model, we assume a forward EPS of $7.46 and a FWD EPS growth rate of 30.62%. Additionally, we assume that EBITDA will grow at an average of 16.81% per year, as it has for the past 5 years. We believe that Autodesk will be able to maintain these high growth metrics because of its powerful technology moat, dominance in market share, and development of new AI technologies. After plugging in these assumptions, Peter Lynch's Fair Value model values Autodesk at $212.64, which is approximately in line with its current market price. Even though the company is highly priced, we believe that this expensive valuation is justified due to its strength in existing products paired with new growth opportunities.

Growth Risk

While Autodesk doesn't face much competitive risk thanks to its technological moat, its valuation is currently sitting at a premium due to the expectation of rapid future growth.

When looking at consensus EPS estimates on Seeking Alpha, it's clear that while growth targets are fairly high at 12-16% yearly expected EPS growth for the next 3 years. The same goes for revenue, which is expected to grow 8-12% over the next 3 years.

Although our valuation model points to a fair valuation at current growth estimates, if revenue and EPS estimates fell, Autodesk's fair value would decrease significantly. We believe that investors should take Autodesk's growth risk into consideration, as high growth is likely already baked into the company's stock price.

Conclusion

We believe that Autodesk will continue to dominate the CAD industry due to its broad technology moat and its usage of AI technology to increase workflow and improve customer experience. Even though the company's valuation is fairly expensive, these tailwinds will maintain the company's consistently high earnings growth, justifying the premium valuation. For these reasons, we believe that Autodesk is a buy.

1. ArchDaily
2. Revit

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The Second Studio Podcast: Is BIM Ruining the Architecture Industry?

February 26, 2023

Videos

The Second Studio (formerly The Midnight Charette) is an explicit podcast about design, architecture, and the everyday. Hosted by Architects David Lee and Marina Bourderonnet, it features different creative professionals in unscripted conversations that allow for thoughtful takes and personal discussions.

A variety of subjects are covered with honesty and humor: some episodes are interviews, while others are tips for fellow designers, reviews of buildings and other projects, or casual explorations of everyday life and design. The Second Studio is also available on iTunes, Spotify, and YouTube.

https://www.archdaily.com/995576/the-second-studio-podcast-is-bim-ruining-the-architecture-industryThe Second Studio Podcast

How to Model Floors, Roofs, and Ceilings in Revit

December 11, 2020

Floors, roofs, ceilings. Speaking in a very generic way, they are practically all the horizontal elements that we can find in the construction of a building. These three parts have a very similar way of modeling in Revit and this is the reason why when learning this software, they almost always appear one after the other. The order is usually a rather logical and therefore similar order: starting first with the floors, later the soffits and, finally, the ceilings. All this, clearly after having modeled the exterior and interior walls of our building.

https://www.archdaily.com/952538/how-to-model-floors-roofs-and-ceilings-in-revitJaime Montava Miró

How to Start a New Project in Revit

November 26, 2020

Revit is a parametric and multidisciplinary design software that can virtually create and insert any building within a BIM process. Revit is not a true modeler, but an aggregator of construction components governed by a series of specific rules. In order to avoid issues within the Revit project, it must be set up carefully. Since each project has different characteristics and requirements, there is no standard procedure when starting a new one. However, becoming familiar with various situations and their necessary steps will greatly help.

https://www.archdaily.com/951320/how-to-start-a-new-project-in-revitPaolo Quadrini

How to Model Ramps and Stairs in BIM using Autodesk Revit

November 19, 2020

Videos

One of the great difficulties we encounter with “classic” plan delineation methodologies are ramp and stair projections. It has always been difficult to avoid calculating the ramp’s slope, as well as the dimensions of the footprint and riser of the communication staircase between two floors of a building. Do they comply with current regulations in my country? Do they adapt to the project standards? Will they be accurately calculated?

Thanks to great advances in project modeling using BIM methodology and Revit software, these calculations can be made with greater ease. However, these elements will probably be an aspect of modeling that will bring us the most difficulties in the project phase.

https://www.archdaily.com/951531/how-to-model-ramps-and-stairs-in-bim-using-autodesk-revitJaime Montava Miró

How to Create and Manage Façade Panels with BIM Elements: Tutorials and Inspiration

June 23, 2020 | Sponsored Content

Videos

Panelized facade systems are a popular exterior design element across multiple project types in today’s architecture. Different material and color options create unique and completely customized exteriors versatile enough to fit almost any design style. Ensuring the vision comes to life exactly as imagined, however, can be tedious with Revit’s or ARCHICAD’s innate capabilities alone. The time-consuming manual process of specifying the design, pattern, colors, and fabrication methods of a panelized facade can be simplified and made more intuitive with Steni’s BIM elements.

https://www.archdaily.com/941320/how-to-create-and-manage-facade-panels-with-bim-elements-tutorials-and-inspirationMegan Schires

BIM Webinar | Revit Masterclass

October 30, 2019

Brief
In this course, we will walk you through the parametric modeling features that Revit Architecture has to offer. Revit Architecture by Autodesk is one of the leading applications in the industry for Building Information Modelling and is reshaping the way we design and build. The ability to create smart 3d models, where each object has attributes that collectively create a robust database for coordinating and extracting information, is one of the most relevant skills any designer should learn today. After this course, you will know the basics of Revit Architecture, and you will feel confident to start creating your BIM

https://www.archdaily.com/927500/bim-webinar-revit-masterclassRene Submissions

Is Integrating Building Performance Difficult at Your Firm?

August 22, 2019

In a study recently published by AIA, less than 13% of architectural firms have incorporated building performance as part of their practice. With buildings contributing 40% of total carbon emissions leading to climate change, just 25 projects are roughly equivalent to planting 1 million trees each year. In addition to that, teams that are able to showcase data-driven and performance-driven decision-making and feature an energy analysis in every pursuit are able to increase fees and generate more revenue. Although integrating building performance sounds like a no-brainer, it proves to be difficult at many firms, because in addition to the practical changes, it requires a culture shift. That culture shift can only happen if the tools are easy to use, accurate, and mesh well with current workflows. Right now is the perfect time to tackle these culture changes due to a few reasons:

https://www.archdaily.com/922544/is-integrating-building-performance-difficult-at-your-firmMegan Schires

Top Tips for BIM Beginners

April 24, 2019

When you start to consider implementing the BIM (Building Information Modeling) methodology, whether as an independent professional or as a construction firm, it's necessary to take into account three key aspects: the technology, the process, and the people who bring it all together. In this article, we will address the key points in every one of these three aspects in order to give you insight into how to best start using BIM.

https://www.archdaily.com/914513/top-tips-for-bim-beginnersRicardo Zepeda

5 Ways to Discuss Building Performance for Your Next Project Pursuit

April 24, 2019 | Sponsored Content

Today in the United States, buildings account for nearly 40% of carbon emissions (EESI) and 78% of electricity usage. The most sustainability-focused firms run energy simulations for less than 50% of their projects (10% for a typical firm) and only doing so late in the process when design changes are limited and insufficient to combat red flags found in the performance report (AIA 2030 report). We can make building performance widespread once we help the entire community discuss the subject in terms of investment and return. Especially during a project pursuit, since having the buy in from the whole team helps ensure the key project metrics are met. Owners are seeking out teams who are using actual metrics and data driven processes that affect their bottom line. This new approach to practice is what makes the younger teams’ standout and will benefit both the climate and the bottom-line. Here are 5 ways to talk about building performance in your project pursuits: 

https://www.archdaily.com/914745/5-ways-to-discuss-building-performance-for-your-next-project-pursuitRene Submissions (Partners)

Façade Lighting Design in Revit: Bringing Buildings to Life

January 28, 2019 | Sponsored Content

The final look of the building is determined not only by the materials, texture, colors and forms of the space, but also by lighting design. Architecture is all about vision, and lighting enhances the way we perceive architecture even more. For example, in the case of outdoor lighting design, lighting the façade will give a new opportunity for a building to showcase its nightlife “personality” by creating a completely different atmosphere in the surroundings.

Let’s see how façade lighting design can be implemented in Revit with the help of the LIGHTS add-on.

https://www.archdaily.com/910073/facade-lighting-design-in-revit-bringing-buildings-to-lifeSponsored Post

The Tools You Need to Easily Meet BIM Mandates

October 01, 2018 | Sponsored Content

For bpr architects, BIM Level 2 is becoming business as usual. This medium-sized, employee-owned firm based in the UK focuses on how good design can add value to a client’s vision. Led by Directors Paul Beaty-Pownall and Steve Cowell, the firm specializes in three core sectors: higher education, rail stations, and regeneration.

https://www.archdaily.com/900504/the-tools-you-need-to-easily-meet-bim-mandatesRene Submissions

5 Architecture Offices Using VR to Present Their Designs

August 05, 2018

Presenting designs to third parties can be a challenging task. Architects may find it difficult to describe spaces to their clients, therefore more firms are incorporating virtual reality into their workflows and project presentations.

Below are 5 architecture offices using SentioVR to present their designs. To see the content in 360º, click on the image and move the mouse.

https://www.archdaily.com/899599/5-architecture-offices-using-vr-to-present-their-designsManuel Albornoz

The Best Architecture Software of 2018

July 24, 2018

When you think of the age of hand drafted architecture drawings, what images come to mind? Is it the iconic plans of the Palladian Villas? Fast forward to present day, where architecture software is favored over hand drawings due to its efficiency and ability to create increasingly innovative structures. With all of the software available to architects, have you ever wondered which one might be the "best"? Luckily, TechRadar has just released their list of leading architecture software for this year.

https://www.archdaily.com/898726/the-best-architecture-software-of-2018Kaley Overstreet

Online Revit Courses for Beginners and Experts

July 17, 2018

As one of the most-used BIM software products around the world, there are a large number of tutorials and online courses that help us to get started in using Revit, or to become an advanced user and take advantage of its many tools. Do you just want to become familiar with its interface so that you can start using it in your projects? Do you need to learn how to link it with AutoCAD or 3ds Max? Don't know how to render or present the results of your models? These courses promise to teach you how.

https://www.archdaily.com/897258/online-revit-courses-for-beginners-and-expertsJosé Tomás Franco

How an Optimized Workstation Accelerates Your Design

July 09, 2018

Which processor? How many graphics cards? How much RAM? For architects, engineers, civil engineers, BIM managers, and other CAD pros, navigating the computer workstation marketplace can be an arduous task, hindered by unknowledgeable sales reps, inaccurate information, and other pitfalls.

https://www.archdaily.com/897688/how-an-optimized-workstation-accelerates-your-designRene Submissions

How Real-Time Rendering Can Reduce Your Time and Effort in Architectural Design

June 05, 2018 | Sponsored Content

Videos

Architects are always trying to be more efficient and adding more value for clients. But with most software, rendering is very time-consuming, impairing efficiency significantly. It is exhausting for designers when the process of visual processing uses energy that would be better invested in design and architecture itself.

With the Enscape plugin, real-time rendering and virtual reality can help to remedy this situation. The plugin integrates as a toolbar in the popular design platforms Rhino, Revit and SketchUp, with a version for Archicad also currently in development. Because the software is a plugin for these popular programs, architects do not need to learn to use new software, but work in their familiar system with some additional features. And since the software runs on the local graphics card, projects do not have to be uploaded to the cloud.

https://www.archdaily.com/895746/how-real-time-rendering-can-reduce-your-time-and-effort-in-architectural-designRene Submissions

WASHINGTON — Seeking to capitalize on commercial space capabilities, the Pentagon’s space policy office is crafting a strategy to harness emerging technologies for national security purposes. An area of particular interest is in-space logistics services such as satellite refueling.

“This strategy will outline the department’s priorities and approach as it relates to integrating commercial capabilities into DoD’s architecture,” said John Plumb, assistant secretary of defense for space policy. 

DoD’s commercial space integration strategy is “for the whole department,” and is a separate effort from the one being developed by the U.S. Space Force, Plumb said at the Professional Services Council’s 2023 Defense Conference.

“It’s an exciting time for innovation in space and there’s major opportunities for the department to leverage, like the rapid production and technology refresh rates that the commercial sector can provide,” said Plumb.

“Our goal is to improve the department’s ability to integrate commercial capabilities to ultimately enhance U.S. national security,” he said.

Plumb highlighted space mobility and logistics as one area of particular interest to DoD. “The department has no on-orbit services to refuel satellites,” he said. 

U.S. Space Command leaders called the lack of refueling options a weakness for military satellites that perform very limited maneuvers to conserve fuel. On-orbit servicing capabilities like refueling would help the U.S. compete with China and Russia as they field more nimble satellites. 

“Especially in the geostationary belt, fuel is often the limiting factor for the life of a satellite,” said Plumb. “So having the ability to refuel would really open new possibilities. So it’s great to see commercial companies already working on that problem.”

Russia’s invasion of Ukraine underscored for Pentagon leaders the advantages that could be gained from commercial satellites for resilience and reconstitution, Plumb said. “And the value of commercial imagery became rapidly apparent … having this persistent ability to use commercial imagery, immediately declassified to keep ahead of Russia’s disinformation campaign,” he added. 

“It’s massively useful. And I think that has helped kind of raise the awareness inside the building of the value of commercial space,” said Plumb. “That is one of the reasons why we’re pushing so hard on the commercial space strategy, to try to focus the department on how to take advantage of this. And so we’re looking forward to figuring that out.”

Plumb said the Pentagon recognizes there are policy and bureaucratic hurdles to integrating commercial technologies. “Frankly, we are engaging with companies and U.S. government stakeholders to understand the obstacles industry faces, including security concerns, and to identify any policy or legal changes to help address them.”

While DoD leaders understand the need to shed legacy systems and adopt commercial technologies, the inertia of current funding streams and established procurement practices makes it challenging.

One of the obstacles is the way the Pentagon articulates its wish lists, known as the “requirements process.” 

“One of the key things that I’ve been pushing to change is how we do requirements,” said Frank Calvelli, assistant secretary of the Air Force for space acquisition and integration.

Speaking at the PSC conference, Calvelli listed a number of procurement reforms he has directed for space programs, and insisted that he wants to see the Space Force innovate faster using available technologies from the commercial market.

But the culture of DoD procurement makes it difficult because many requirements for space systems, for example, are met via existing “programs of record,” many of which rely on legacy technologies, Calvelli explained.

“We seem to drop everything into this magic word ‘program of record,’” he said. “And we tend to tie requirements to programs of record.”

Calvelli would favor replacing programs of record with “mission areas.” For example, DoD could bundle all its requirements for space domain awareness “in a single bin,” said Calvelli. Then it could decide what specific items under space domain awareness could be bought as a commercial service, and allocate funding accordingly.

The same could be done for satellite communications, he said. “We tend to just bin things in programs and then stovepipe requirements for a program.”

Calvelli, who worked at the National Reconnaissance Office for most of his government career, said one of the problems he’s seen at DoD is a shortage of acquisition professionals specialized in space systems. “Compared to the intelligence community, there is significantly less specific space training that goes on in the DoD.” 

Commercial investment

In military space programs, there is still a mindset from decades ago, when the government controlled the pace of technology, but that is no longer the case, said William McHenry, a senior advisor to the director of the Defense Innovation Unit.

DIU is a defense agency created to bring commercial innovation into military programs.

“In many sectors the commercial industry actually has the best technology. But we haven’t adapted our processes to keep pace with the commercial technology. We’ve established a culture of risk aversion,” McHenry said at the PSC conference. 

He said DIU expects to get bigger budgets in the coming years and plans to invest in space projects that integrate commercial technologies. 

Some of the space projects DIU is now focused on include a “hybrid space architecture” to connect commercial and government satellites in a mesh network in space. 

Space logistics and refueling are also areas “that I’m pretty excited about,” he said.

The Pentagon has to do a better job transitioning R&D projects into actual capabilities, said McHenry. He noted that DoD spends nearly $150 billion a year in research and development, and only a small fraction of projects will transition to procurements.

“Where’s that conversation? I think that’s something that we can work on going forward,” he said. 

DoD needs better insight into what’s happening in the industry, he added. “We don’t have the expertise in the government that we need across the board to understand how fast technology is moving.”

For many businesses, creating a secure and effective payment solution is of great importance, whether you opt to construct your own payment gateway or consider other possibilities.

By making well-informed choices and utilizing the knowledge of industry experts, businesses can position themselves at the forefront of payment processing, fostering growth and achieving success in their operations.

In my previous article, we I discussed the advantages and challenges of building a payment gateway. If you're contemplating building a payment gateway and want to delve into the logistics, this article is for you.

I'll answer common questions about costs, time estimates, and the required technology stack, as well as outline key considerations for your development strategy.

Building a Payment Gateway: Where to Begin?

When considering building a payment gateway, your initial step isn't necessarily consulting developers or fintech consultants. Instead, you need to establish business relationships with a payment processor or acquiring bank.

To offer a payment gateway service, you need a connection, which is provided by a payment processor. This entity moves transactions through the payment network and may also act as an acquiring bank in some cases.

Your chosen processor will supply the technical details for integrating your gateway with their system, potentially requiring multiple partnerships for accepting various payment types.

Otherwise, you can use an acquiring bank, which provides merchant accounts needed to accept digital payments. They assume a level of risk associated with your business, including chargebacks, refunds, ACH returns, and potential fraud.

Check carefully whether your chosen financial institution can set up a merchant account tailored to your needs.

How Much Does it Cost to Build a Payment Gateway?

Building a minimum viable product (MVP) for a payment gateway typically costs between $200K and $250K, with variations depending on desired functionality. This MVP would enable credit and debit card payments.

More affordable options may be customizing an existing payment gateway or integrating a third-party payment gateway.

What Technology Does a Payment Gateway Require? 

A payment gateway, a crucial component of e-commerce and online transactions, relies on several key technologies to facilitate secure and seamless payment processing.

First and foremost, robust encryption protocols, such as Secure Socket Layer (SSL) and Transport Layer Security (TLS), are essential to ensure the confidentiality and integrity of sensitive payment information.

Additionally, Payment Card Industry Data Security Standard (PCI DSS) compliance is a prerequisite, involving various security measures and best practices to protect cardholder data.

To facilitate the actual transaction, payment gateways require integration with various payment methods, including credit cards, debit cards, digital wallets, and even cryptocurrency options. They also must employ sophisticated fraud detection and prevention mechanisms, often utilizing machine learning algorithms and artificial intelligence to identify and mitigate potential risks.

Your payment processor will provide integration specifications, guiding your technology choices for building the payment gateway. If you plan to accept various payment types, you may need additional specifications from other processors or acquirers.

How Long Does it Take to Build a Payment Gateway?

Creating a payment gateway from scratch can take years. An alternative is licensing a white label product, which can be operational within months. Integration with processors or acquirers may also take months or years, affecting market viability.

For an MVP payment gateway, expect roughly six months of development, subject to specific requirements.

Can My Payment Gateway Operate in Other Countries?

Expanding your payment gateway operations to multiple countries can be a strategic move to tap into a global customer base. However, achieving success in different regions comes with various challenges and considerations.

One of the fundamental factors to address is partnering with payment processors or acquirers that have a presence and support in those specific countries. These processors have established connections with local banks and financial institutions, which is crucial for handling international transactions efficiently.

You must also ensure that your payment gateway technology is adaptable to meet these regulatory demands and compliance protocols. This involves addressing issues such as data protection, tax regulations, currency conversion, and even consumer protection laws.

Additionally, consider the capability of integrating with diverse payment methods commonly used in those regions, such as preferred local payment cards, e-wallets, or alternative payment systems. You'll also need to have multi-lingual and multi-currency support to provide a seamless and familiar payment experience to customers worldwide.

Other Key Considerations for Developing a Payment Gateway

Developing a payment gateway requires careful planning. Consider the following aspects:

1. Interaction Flows: Define how buyers, sellers, and the platform interact. Consider data collection, customer types, marketplace type, legal requirements, multi-party transactions, and multi-currency support.

2. Data Handling: Ensure secure handling of customer and financial data while complying with financial regulations and data protection policies.

3. Integration: Decide how to integrate payment service providers into your gateway, considering user experience and payment method availability.

4. Scalability: Plan for future transaction volumes and workload to avoid growth-related issues.

5. Time to Market: Complex systems take longer to develop, so balance functionality with time constraints. Consider using existing payment gateways for a quicker launch.

6. System Architecture: Outline technical details, including deployment, monitoring, and security.

7. Development: Choose the right team, focus on automation, code with security in mind, and add dispute resolution interfaces.

8. Operations and Maintenance: Ensure ongoing support and bug resolution, either through internal teams or external specialists.

9. Ongoing Development: Payment gateways are continuously evolving, so be prepared to add new features and payment methods.

Final Word: Factors for Success

A successful payment gateway hinges on security, functionality, usability, and user experience. Experimentation, adaptation, and adherence to these principles are key. Whether you build your payment gateway in-house or partner with a payment processessing development company, your choice can add value and profit to your business.

In today's digital landscape, the development of a secure and efficient payment solution is crucial. By making informed decisions and leveraging industry expertise, businesses can excel in payment processing, driving growth and success in their operations.