Usage-based pricing (UBP) in SaaS charges customers based on actual consumption, such as API calls or data rows, rather than a flat monthly fee, aligning costs with measurable activity. This model is prevalent in infrastructure services like cloud computing, where varied customer usage justifies different charges, and it's increasingly applied in AI applications at the application layer. UBP can increase transparency and align revenue growth with customer success, though it presents challenges in revenue forecasting and can be complex to implement. Different UBP models include pay-per-use, credit-based, percentage-based, outcome-based, and hybrid pricing, each with distinct benefits and drawbacks. While UBP can drive customer acquisition and retention by offering scalability and reducing over-subscription, it requires careful planning, reliable metering systems, and transparent pricing structures to avoid customer confusion and maintain trust. The trend towards UBP continues to grow, with many SaaS companies exploring this model to gain a competitive advantage and better align pricing with customer value.