Usage-based billing (UBB) is a favorable model for API providers as it aligns revenue with the actual value delivered through metrics like requests or tokens, necessitating a robust and transparent billing system. Systems like Lago facilitate this by providing the necessary infrastructure to handle high-volume events and billing complexities, allowing businesses to focus on their products. UBB is distinct from traditional SaaS billing as it charges based on consumption, which is crucial given the diverse ways APIs are utilized. While developing a UBB system can be complex due to factors like varied tax regulations and billing cycles, platforms like Lago offer pre-built solutions that handle these challenges. Key strategies for successful UBB include selecting clear, understandable metrics for customers, automating transparency through dashboards, and being prepared for significant engineering efforts to manage the billing system effectively.