Usage-based billing is a pricing model where customers are charged based on their use of a product or service. It is also known as a metered or pay-for-what-you-use model. Since customers pay for what they use, charges may fluctuate every period based on the actual usage. This model is becoming popular with the rise in cloud computing and is spreading out to almost every sector.
You may also sometimes stumble upon this concept in the form of variable pricing, pay-per-use billing, consumption-based pricing, and volume billing. Usage-based pricing especially in highly competitive markets, is still evolving and becoming more standardized. It has the potential to offer very granular data on the consumption of its services or products by an individual customer.