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Oct 13, 2020“Usage-based billing requires technology to convert minutes, bits, clicks and numerous other types of data into billable increments. In billing, we call this mediation, and without an accurate and scalable means to convert incremental units into dollars, euros, yen and more, it's difficult to build a sustainable business model based on pay-as-you-go revenue.”
James Messer, Gotransverse founder and CEO, in Forbes
Pay-as-you-go is nothing new, but as models become more varied and quantities grow, it becomes more and more difficult for companies to consistently and efficiently convert usage units into prices. Last month, Gotransverse founder and CEO James Messer addressed that challenge in Forbes, discussing the growing demand for pay-as-you-go and other recurring billing models that enhance customer loyalty and drive significant revenue growth. The key to making these models work, he says, is automated mediation.
Messer defines this conversion process — called mediation — as “the process of converting raw data into a form that can be interpreted by a rating engine, which then calculates the price that should be on the invoice.”
Most of what we know about mediation, he says, comes from the telecommunications industry. “By using data from a detailed call record, for example, a rating engine can calculate charges for each variable based on the data type. The result is an invoice that accurately reflects system utilization.”
Messer stresses that the same model applies to a wide variety of consumption-based revenue models across a range of industries, and more and more businesses are reaping the benefits of these models. Consumption-based or recurring billing can take on a lot of different forms, and we break them down in detail in our recent blog post, but Messer notes several in Forbes, as well, including traditional pay-as-you-go, time-based usage, tiered and tapered pricing, and others.
The catch is that, for these models to be scalable — for them to continue to work effectively as the frequency and complexity of usage grows — the mediation process must be flawless. “For accurate billing, usage variables have to be precisely mapped,” says Messer. Businesses should be looking for mediation technology that can provide consistent and accurate data conversion, guaranteed data quality, error detection and usage reprocessing, and accessibility of data for analysis.
And the secret to ensuring the data is precisely mapped and these criteria are met, he says, is automation.
“Mediation’s primary function is to normalize data and convert information from disparate sources. With mediation automation, you can make sense of data from disparate sources in real time. […] Relying on internally developed billing technology makes it difficult to scale quickly and maintain accurate billing, let alone test new revenue models. That’s why more organizations are standardizing on third-party billing platforms.”
What to Look for in an Automated Mediation Engine
Messer knows replacing legacy billing platforms with modern technology that will power, rather than hinder, growth can seem like a gargantuan undertaking, so he provides a list of characteristics to consider to guide the search. First is flexibility. “Does your mediation engine allow you to try new business models and adapt to creative pricing? How well does it support various types of conversions to the second, byte, penny or unit?” Then, error detection. “As part of mediation, the platform should be able to identify errors such as malformed data and changes in data format. How well does it deal with those errors on the fly?” He also recommends considering whether a platform offers a rules-based workflow and ensuring it builds in the scalability and traceability you need to grow quickly, with minimal friction.
To learn more about the power of automated mediation to drive pay-as-you-go billing models, read Messer’s full article in Forbes. And when you’re ready to talk about how Gotransverse can help your business embrace recurring revenue models at scale, we invite you to call us to schedule your complimentary, personalized demo.