Usage-Based Billing

What Is A Billing Mediation System & Why Does It Matter?

September 06, 2023

A familiar term to most, mediation is the process of settling disputes in order to come to an agreed upon resolution. But what exactly is billing mediation? Moreover, what is a billing mediation system, and why do these systems matter – especially to subscription-based organizations?

Built on repeat business, subscription-based businesses require mediation to ensure accurate billing. Even though it plays a critical role in the billing process, mediation is often overlooked. Given that today’s customers only want to pay for what they use – be it on-demand cloud computing, online gaming, food delivery services, streaming media, bicycles or car-sharing. A billing mediation system has become a necessary tool for organizations to accurately convert usage data or metered rating to pricing.

Many organizations – subscription-based, pay-per-use, as well as others – lack these systems. This makes it virtually impossible to accurately capture and monetize data, which results in significant revenue loss. An EY report estimates that companies are losing up to 5% of their revenue due to revenue leakage, of which billing errors are a significant contributing factor.

A Billing Mediation System Can Plug Billing Revenue Leaks

When it comes to usage or metered rating, many organizations aren’t flexible. They can’t map and monetize the data – regardless of the source or format of the data. Traditional mediation methods include handling it manually or implementing add-ons to legacy billing systems. These are not only inefficient but prone to errors that result in revenue leakage. And as the business grows and usage volumes increase, revenue leakage proportionately increases, posing the very real threat of becoming financially ruinous to the organization. Fortunately, there’s a way to stop the flow of revenue seepage. This is where billing mediation comes in – more specifically, a built-in billing mediation system.

A billing mediation system converts usage or metered data into a format that billing systems recognize and can use. In other words, it collects data like who the usage events belong to, what products were used, how much or the quantity of the service used and when the service was used. It then converts and transforms the data before routing it to be rated and billed. The conversion of the data provides the data normalization needed so that the company can accurately bill customers.

Basically, the process of automating the collected data, metering the data, and rating the data is known as mediation. This process provides the flexibility organizations need to move beyond simple subscriptions to develop and deploy innovative usage-based charging models such as consumption-based pricing.

Unlock New Business Opportunities

With technology advancing at an accelerated pace, the door has opened for current companies, as well as new businesses to charge for a variety of events. For example:

Anything-as-a-Service (XaaS)

Although a technology that is still in its formative years, the XaaS (also referred to as Anything-as-a-Service) business model is booming. XaaS provides customers with a wide range of digital services and products such as:

  • Software as a Service (SaaS)
  • Platform as a Service (PaaS)
  • Infrastructure as a Service (IaaS)
  • Storage as a Service (StaaS)
  • Database as a Service (DBaaS)
  • Disaster Recovery as a Service (DRaaS)
  • Communications as a Service (CaaS)
  • Network as a Service (NaaS),
  • Data as a Service (DaaS)
  • Hardware as a Service (HaaS)
  • Desktop as a Service (DaaS)
  • Healthcare as a Service (HaaS)

XaaS providers realize many benefits, including financial benefits like fewer capital expenditures resulting in lower total cost of ownership. Improved productivity because there’s no or reduced network downtime. It also offers improved cybersecurity (better security at a lower cost) and increased agility (easy access to low-cost tools, software). All of which allows businesses to be more responsive to customer needs and market changes.

The Internet of Things (IoT)

Estimated to reach $1.4 trillion by 2027, the IoT device market shows no signs of slowing. Connected through a communications network, IoT devices share data through an IoT gateway, platform, or another IoT device making its deployable applications virtually unlimited. For example, applications for IoT currently include:

  • Retail and supply chain management
  • Home automation
  • Wearables
  • Smart cars
  • Freight and fleet management
  • Healthcare
  • Manufacturing
  • Warehousing
  • Energy
  • Mining
  • Smart cities
  • Smart buildings
  • Pet care
  • Sports
  • The environment
  • Voice assistants
  • and many more!

Benefits for IoT encompass both the business and customers. They range from providing the ability to operate more efficiently, improving decision making, reducing costs, increasing the value of the business, providing real-time, predictive and prescriptive insights, and enhancing the customer experience. And when paired with artificial intelligence (AI) and machine learning (ML), the data collection process becomes simpler and more dynamic.

Voice over Internet Protocol (VoIP)

This provides the ability to transmit voice and multimedia content over an internet connection. The technology is loaded with advantages such as cost effective/less capital expenditure, extensive features and functionality, increased mobility, high scalability, improved productivity/multitasking, and high reliability. These providers bill customers based on consumption. For example, the provider may charge based on call duration, the transfer of megabytes of data, pricing for video usage, or the number of text-based messages from short message/messaging service (SMS) or multimedia messaging service (MMS).

When it comes to billing for the above products and services, what do they have in common? Data, a lot of data. And as we generate increasingly larger volumes of data, we’ll continue to see the introduction of new technologies. However, at the center of the products and services is billing. To ensure accurate and timely billing of consumption-based offerings, billing mediation systems are becoming increasingly important.

Increase Your Bottom Line with a Billing Mediation System

The increasing amount of data along with the reality that it comes from numerous sources and in different formats make a billing mediation system a must for consumption-based businesses. When billing mediation is used in conjunction with billing, organizations can easily offer more pricing and packaging options. Built-in mediation allows businesses to automatically collect and convert usage data and automate the rating and pricing process, providing an intuitive way to generate more revenue and improve the bottom line.

Creative Pricing Models

Companies can move beyond simple subscriptions and charge customers for how much of the service or product is used with usage-based pricing. These innovative pricing approaches not only have the potential to expand the customer base but help to reduce churn. For example, a small startup using the AWS on-demand cloud computing service may initially select the lowest pricing tier. However, as the business scales and more space is required, they can easily switch to a higher-priced tier that provides more access instead of going to a competitor.

Additionally, usage-based pricing provides businesses the agility to anticipate the needs of customers. By metering usage, a business can track and analyze product or service usage data and send promotions in real time to respond to the immediate needs of the customer.

Rules-based Workflow Management 

A key to optimizing your creative pricing models is through automation. With rules-based workflow you can automate the process of normalizing data, filtering out unnecessary usage records, and routing information to the appropriate customer accounts, all with predefined rules that apply logic to the process.

These same rules allow the rates to be accurately applied to usage events automatically, streamlining billing and invoicing. Before mediation, these processes were handled manually, leading to errors in billing. Now, billing systems are programmed using a variety of rules, allowing for customization that meet the specific needs of customers. This flexibility can only be supported with sophisticated a billing mediation system that automates usage-based pricing, and has the ability to scale to meet the dynamic needs of a growing business.

Real-Time Updates

Unlike rigid billing systems that can only perform weekly or monthly usage updates, robust billing systems perform mediation in real time. This is a critical need for fast-growing organizations. With up-to-the-second usage information, real-time mediation enables you to proactively identify errors, prevent inaccurate invoicing, notify customers when usage thresholds are reached, and more.

Transform Your Data into Real-Time Revenue

Designed to enable innovative usage-based pricing that meets the unique needs of end users in any industry, BillingPlatform’s cloud-based solution includes built-in mediation, giving you the flexibility to bill and rate on any aspect of your services or products – clicks, API calls, downloads, seats, text messages, minutes, bandwidth – virtually anything. Rather than manually performing calculations or having to purchase a third-party application, we provide the tools needed to automate data collection, transformation, and routing so you can capitalize on any consumption-based offering.

We know the value that real-time mediation can provide to a business, so we make it easy for our customers to collect usage data from multiple sources. While other billing system vendors require customers to purchase a separate mediation application, we’ve made it native to our platform. Our mediation engine can be customized for any consumption-based pricing model such as usage-based pricing, outcome-based pricing, dynamic pricing, etc.  With our simple usage mapping interface, you can set custom rules that correspond to your unique pricing strategy and quickly deploy creative models.

As you scale your business, our built-in mediation platform also scales. If competitors deploy potentially disruptive pricing models, you can quickly respond and update your mediation processes. This enables you to increase revenue, attract new customers, and maintain existing customers – all from a single solution. With the right billing mediation system, you’re able to increase your revenue potential, deliver exceptional customer experiences, and gain a competitive advantage. Start offering the pricing options your customers want, read our datasheet or contact a member of our team to learn how.

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