Usage-based pricing is increasingly popular among SaaS and AI companies, with 39% of SaaS firms now primarily using this model, driven by the rise of AI APIs and cloud infrastructure that necessitate flexible billing aligned with customer value. The pay-as-you-go (PAYG) model charges customers based on actual consumption, offering benefits like lower upfront costs, revenue growth aligned with customer usage, and valuable insights into customer behavior. However, it presents challenges such as revenue unpredictability, customer retention risks, and the complexity of implementing accurate metering and billing systems. Hybrid pricing models, combining PAYG with subscriptions or minimum commitments, offer a balance of predictability and flexibility. Companies like Lago offer developer-friendly, API-first billing platforms that facilitate real-time event processing, flexible pricing, and global compliance, making it easier for businesses to adopt usage-based and hybrid pricing strategies effectively.