Lago, best Chargebee alternative for Usage-based billing

What is Chargebee?

Chargebee, founded in 2010, is a recurring billing and subscription management platform that helps businesses automate and streamline their subscription operations. In 2021 and 2022, Chargebee acquired several new products (RevRec, Receivables, Retention) and transformed into a Revenue Growth Management (RGM) platform for subscription businesses. It now provides two services including Billing and Retention.

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What is Lago?

Lago is an Open Source metering and usage-based billing solution. It offers a self-hosted and cloud-based, scalable, and modular architecture to manage subscriptions, usage based billing and all the nuances in between. It's the go-to choice for companies that require a powerful tool to handle complex billing logics, allowing you to build a comprehensive billing system from scratch with ease.

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How is Lago different from Chargebee?

This article points out the differences regarding Billing capability between Chargebee and Lago. Following that, it provides readers with a comprehensive overview and extends support for evaluating and selecting the most suitable billing system.

1. Chargebee is not designed for usage-based billing. Lago is.

Usage-based pricing

Chargebee supports straightforward pricing models such as Subscription and Standard usage-based pricing (e.g. $20 per user). However, it may not be flexible enough for businesses that need support for complex usage-based pricing models.

Lago is designed for usage-based pricing models, providing a high level of flexibility. This allows businesses to implement and tailor pricing models that accurately reflect your unique strategies and revenue structures, especially when dealing with intricate billing scenarios.

For example, both softwares can handle standard subscription pricing like Netflix and basic usage-based pricing like Twilio's per-message rates. However, for complex models like PayPal's per-transaction pricing with a percentage and fixed fee, plus minimum and maximum limits, Chargebee can not do it, whereas Lago offers flexibility to configure these models.

Usage record

In Chargebee, the maximum number of usages that can be recorded for a subscription is 5,000, over its lifetime (see here). This means that you won't be able to send more than 5,000 usage records to bill a customer.

Lago is usage-based by default, letting you record an unlimited number of usages and subscriptions for a customer. You can send usages granularly, whenever a new event comes in, or at a heartbeat frequency (e.g. every minute, hour, or day).

Idempotency key

An idempotency key is a unique value used to identify subsequent retries of the same API request.

In Chargebee, there is no idempotency key for usage events. This can lead to the same event being recorded multiple times, resulting in inaccurate unit charges. To tackle this, you will need to set up your own idempotency system to make sure each event is unique.

Lago is a usage-based billing engine by default. When you send events to Lago, it guarantees that each transaction_id is unique. If not, the event won’t be processed to prevent duplicate billing data.

Aggregating and sending usage

Chargebee has a rate limit of 150 simultaneous requests per minute, which could prevent you from sending granular usage when you start scaling your number of customers. Additionally, Chargebee does not interpret events into proper units to be charged. You will need to build a pre-aggregation billing system on top of Chargebee that sends the final aggregation result to be billed. This engine must be maintained in addition to the Chargebee integration.

Lago is usage-based by default, so it automatically interprets events into proper units to charge. This final metric is calculated based on the events sent during a full billing period. Lago offers the flexibility to calculate any billable metric. Furthermore, Lago has no rate limit for usage-based billing events.

To illustrate these differences, we took the example of implementing a billing system for a Banking as a Service provider. Read more about it here.

2. Is Lago cheaper than Chargebee?

Chargebee offers two services including Billing and Retention with separate fees.

For billing, Chargebee offers:

• Starter plan: No flat fee, with the first $250K of cumulative billing included; 0.75% on billing thereafter. This plan includes basic billing features.
• Performance plan: $599 monthly flat fee for up to $100K of monthly billing; 0.75% on billing thereafter. This plan offers access to some advanced features.
• Enterprise plan: Custom pricing.

Lago offers a forever-free open-source solution for small businesses, allowing access to fundamental billing features. Besides, Lago provides Startup and Enterprise Plans with access to premium features, as listed here.

3. Transparency matters

Transparency is one of the 8 things to consider when choosing your billing system.  When choosing a third-party billing solution, it's essential to ensure your team understands its architecture. This knowledge is invaluable, especially for tricky scenarios. You want to avoid being in the dark when trying to resolve critical issues.

If you opt for a closed-source solution like Chargebee, push for transparency and understanding of how it works.

Lago, being open-source, offers complete transparency, allowing engineers to audit its code and even build on top of it. And the best part is, that it’s always free and accessible. So, Lago serves as a fallback option without vendor lock-in concerns. What’s the fallback option for a tool like Chargebee? The pertinent question arises: what if Chargebee discontinues its product or enforces a significant price hike?

Table of comparison between Chargebee and Lago

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Is Lago cheaper than Chargebee?

We're not fans of Chargebee's 'rent-seeker' pricing approach, as it doesn't scale with your business. Chargebee charges a fixed monthly platform fee and takes a cut on your revenue.

Lago is an open-source project, meaning you can have a billing engine for free! In addition, Lago offers a cloud solution. We prefer to charge a fixed platform fee and a volume-based fee for the fully managed application.

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Is Lago an open-source alternative to Chargebee?

Yes, Lago is an open-source and open-core Chargebee alternative. Our GitHub repository is open to everyone, running under an AGPL v3 license.

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Is Lago integrated with payment providers, like Chargebee?

Just like Chargebee, Lago is agnostic to payment providers. It can be connected to any PSP, either through native integrations (like Stripe Payments or GoCardless) or custom integration.

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Does Lago provide a user interface similar to Chargebee's?

Yes! In addition to being API-first, Lago provides a user-friendly interface that can be used by non-technical people.