Beyond Subscriptions: Powerful Billing Models for Modern Tech

The rise of AI-powered services, complex SaaS offerings, and infrastructure platforms has created both challenges and opportunities in billing strategy. According to recent data, companies that implement usage-based billing models grow revenue 38% faster than those relying solely on flat-rate subscriptions. This shift isn't just about following trends—it's about creating sustainable business models that scale with customer success.

The Evolution of Tech Billing in 2025

The traditional subscription model—charging a fixed monthly or annual fee—served as the foundation for the SaaS revolution. However, as technology services become more complex and consumption patterns more variable, billing models have needed to evolve accordingly.

Current Billing Landscape

The payments ecosystem is undergoing profound transformation, driven by technological advancements, changing consumer expectations, and evolving regulations[1]. This shift isn't merely about adopting new technologies but reimagining the entire payment experience to improve operational efficiency and unlock new innovation opportunities.

Several key trends are shaping the billing landscape in 2025:

• AI and AI-powered products have intensified the need for flexible pricing models that match variable usage patterns and underlying infrastructure costs
• Real-time payment systems enable 24/7 transaction processing and settlement, improving cash flow management[1]
• Embedded finance integration within non-financial platforms transforms how payments are processed and billed[1]

Beyond Basic Subscriptions

While streaming services, monthly subscription boxes, and software subscriptions remain popular[2], forward-thinking companies are implementing more nuanced approaches. The modern payment tech stack now incorporates AI-driven solutions to maximize security and revenue potential[3].

Usage-Based Billing: The Core of Modern Monetization

Usage-based billing has emerged as the cornerstone of modern tech monetization strategies. This approach directly ties customer costs to their actual consumption of your service, creating a natural alignment between value delivered and revenue generated.

How Usage-Based Models Work

In a usage-based model, customers pay based on their consumption of specific metrics. These metrics might include:

• API calls processed
• Data storage utilized
• Compute resources consumed
• Transactions completed
• Users actively engaged

The key advantage is scalability—customers with minimal usage pay less, while power users who derive significant value pay more. This creates a natural growth path that expands revenue as customer value increases.

Implementation Considerations

Implementing usage-based billing requires robust metering infrastructure to accurately track consumption metrics. Your billing system must be able to:

1. Collect usage data across all customer touchpoints
2. Aggregate and normalize this data for billing purposes
3. Apply pricing rules to calculate charges
4. Generate accurate invoices based on consumption
5. Provide transparency to customers about their usage

Lago's metering engine processes up to 15,000 billing events per second, ensuring that even the most demanding usage patterns can be accurately tracked and billed without performance degradation.

Hybrid Billing Models: Combining Stability and Flexibility

Many successful tech companies are finding that hybrid billing models—combining elements of subscription and usage-based approaches—provide the ideal balance between predictable revenue and growth potential.

The Subscription + Usage Hybrid

This model features a base subscription fee that provides access to core functionality, with additional charges based on usage of specific features or resources. Benefits include:

• Predictable baseline revenue from subscriptions
• Opportunity for revenue expansion through usage growth
• Lower barrier to entry with reasonable base fees
• Natural upsell path as customer usage increases

For example, an AI document processing platform might charge a base subscription for access to the platform, then bill additionally based on the number of documents processed or specific AI features utilized.

Tiered Usage Models

Tiered usage models offer another hybrid approach, where pricing is structured in volume-based tiers:

Usage TierPrice Per UnitBenefits0-1,000 units$0.10 per unitPay only for what you use1,001-10,000 units$0.08 per unitVolume discount as usage grows10,001-100,000 units$0.06 per unitSignificant savings for power users100,001+ units$0.04 per unitEnterprise-level pricing

This approach rewards increased usage with better rates, encouraging customers to expand their utilization of your platform.

Credit-Based Pricing: Flexibility with Predictability

Credit-based pricing has gained significant traction, particularly for AI and data-intensive services where usage can vary dramatically.

How Credit Systems Work

In a credit-based model, customers purchase credits upfront that can be consumed across various features or services. Different actions consume different amounts of credits based on their complexity or resource requirements.

For AI services, this might look like:

• Simple text classification: 1 credit
• Image generation: 5 credits
• Complex document analysis: 10 credits
• Custom model training: 100 credits per hour

This approach gives customers flexibility in how they use your service while providing predictable costs and simplifying the purchasing process.

Prepaid Credits vs. Credit Subscriptions

There are two primary approaches to credit-based systems:

1. Prepaid credits that never expire, giving customers complete control over their spending
2. Subscription credits that refresh monthly, providing predictable billing for customers

Lago supports both models, allowing businesses to implement the approach that best fits their customer base and service type. The platform's prepaid credits feature enables businesses to offer customers the ability to purchase credits in advance and draw down on them as services are consumed.

Pay-As-You-Go for Maximum Flexibility

For certain types of services, particularly infrastructure and utility-like offerings, pure pay-as-you-go models provide the ultimate flexibility.

When PAYG Makes Sense

Pay-as-you-go works best when:

• Usage patterns are highly variable
• Customers need maximum cost control
• Your service provides utility-like functionality
• Customers may use your service sporadically

This model has become particularly prevalent in AI services, where processing requirements can vary dramatically based on project needs and usage spikes.

Implementing Effective PAYG Billing

Successful pay-as-you-go implementation requires:

• Real-time usage tracking and metering
• Transparent pricing that customers can easily understand
• Clear usage dashboards so customers can monitor costs
• Spending limits or alerts to prevent unexpected charges

Lago's real-time metering capabilities make implementing pay-as-you-go billing straightforward, with built-in support for spending caps and usage alerts to keep customers informed.

Consumption-Based Pricing for AI Services

AI services present unique billing challenges due to their variable resource consumption and the difficulty of predicting costs.

Metering AI Consumption

Effective AI service billing requires metering multiple dimensions:

• Compute resources utilized
• Model complexity and size
• Data processed or generated
• API call frequency and complexity
• Storage requirements

By tracking these metrics, AI providers can create pricing models that accurately reflect their costs while remaining transparent to customers.

Token-Based Pricing

Many AI services have adopted token-based pricing, where operations are billed based on the number of tokens processed. This approach:

• Provides a clear unit of consumption customers can understand
• Scales naturally with the complexity of requests
• Aligns closely with underlying infrastructure costs
• Enables precise billing for exactly what's used

Lago's metering system can track token consumption in real-time, enabling accurate billing for even the most demanding AI applications.

Building Your Modern Billing Strategy

Creating an effective billing strategy requires careful consideration of your product, customer base, and business goals.

Selecting the Right Billing Models

When evaluating billing models, consider:

• How do customers derive value from your product?
• What usage patterns do you observe across your customer base?
• Which metrics most accurately reflect resource consumption?
• What billing approach will scale with your customers' growth?
• How can you balance predictability with flexibility?

The most successful companies often implement multiple billing models to serve different customer segments or use cases.

Technical Requirements for Modern Billing

Implementing advanced billing models requires robust technical infrastructure:

1. A metering system that can accurately track usage across all relevant dimensions
2. A billing engine that can apply complex pricing rules to usage data
3. An invoicing system that generates clear, accurate bills
4. Customer-facing dashboards that provide transparency into usage and costs
5. Integration capabilities to connect with your product, CRM, and payment processors

Lago provides all these capabilities in a single platform, with the flexibility to support virtually any billing model you can design.

Conclusion

The evolution beyond basic subscriptions represents a significant opportunity for tech companies to align their revenue models more closely with the value they deliver. By implementing sophisticated billing models—whether usage-based, hybrid, credit-based, or consumption-driven—businesses can create pricing strategies that scale naturally with customer success.

As AI and other advanced technologies continue to reshape the tech landscape, billing flexibility will become increasingly critical. Companies that implement the right billing infrastructure today will be well-positioned to adapt their monetization strategies as their products and markets evolve.

For businesses looking to implement these advanced billing models, Lago offers a comprehensive platform that handles everything from metering to invoicing, with the flexibility to support virtually any pricing strategy. Whether you're launching a new product or evolving your existing billing approach, having the right billing infrastructure is essential for sustainable growth in today's dynamic tech environment.

Citations

[1] https://justt.ai/blog/modern-payment-tech-stack/

[2] https://ellingtontech.com/7-examples-of-subscription-based-payment-models-in-2025/

[3] https://www.echohealthinc.com/blog/the-future-of-payments-in-2025-modernization-in-the-us

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