How to choose or build a billing system in the EU

Introduction: The Rise of Complex Usage-Based Pricing in Europe

Businesses in Europe are increasingly adopting sophisticated monetization strategies that go beyond traditional subscriptions. The prevalence of usage-based pricing models in the B2B SaaS sector has nearly doubled over the past five years, with 60% of companies currently either fully implementing or experimenting with consumption-based pricing [1]. Industry analysis predicts that by 2024, 61% of the general SaaS index will have adopted some form of usage-based pricing [2], driven by customer demand for flexible payment structures aligned with actual value consumption.

This shift toward enterprise billing solutions is particularly pronounced in Europe, where the global Fintech SaaS market was valued at $320 billion in 2024 and is expected to grow at a CAGR of 14.6% through 2030 [3]. European markets are embracing usage-based models as customers, facing economic pressures, increasingly prefer "pay for what they use" rather than rigid contract commitments.

However, implementing metered billing solutions presents significant challenges, especially within Europe's complex regulatory environment. Businesses must track real-time usage events, apply sophisticated pricing rules, and maintain compliance with EU invoicing and tax requirements. Many organizations have "revamped their billing stack three times" with some experiencing "failed implementations" because traditional systems cannot accommodate specific enterprise requirements.

Lago is a billing/metering suite for complex pricing and monetization. Ideal for AI, cloud, API, fintech, CPaaS and DevTool companies who want to scale faster. It's the best alternative to Chargebee, Recurly or Stripe Billing for companies that need to handle complex billing logic. As an open-source software for metering and usage-based billing , Lago provides European businesses with the flexibility to address their unique billing requirements while maintaining complete control over their infrastructure and data.

The Challenge: Why Traditional Billing Falls Short for Modern Pricing

Real-Time Usage Tracking at Enterprise Scale

Modern pay as you go billing software must handle millions of usage events per second while maintaining accuracy and performance. Unlike traditional telecom services based on voice minutes or data consumption, IoT and SaaS devices generate continuous data streams that may send small amounts frequently or large data packets occasionally, requiring advanced tracking systems and real-time billing solutions [4]. For example, AI platforms like Mistral charge per token (fractions of words), requiring systems capable of processing billions of micro-transactions.

Lago excels at processing high-volume usage data (up to 15,000 events/second) and converting it into accurate invoices through real-time metering. [1] Lago's event-based architecture provides a solid foundation for building a fair pricing model that scales with your business. [2]

Complex Hybrid Pricing Models

Common hybrid models combine tiered pricing based on features or user roles with per-unit pricing for specific resources like data storage or bandwidth, with 46% of SaaS companies implementing such hybrid approaches [5]. A fintech platform might charge €99/month base fee plus €0.02 per transaction, with volume discounts starting at 10,000 monthly transactions. Traditional billing systems struggle with such complexity, often requiring extensive custom development.

Lago supports all pricing models. Create pay-as-you-go and hybrid plans in no time with our intuitive user interface or API. [2] Lago empowers you to handle multi-product, multi-geography setups with ease, incorporating both subscriptions and usage-based charges seamlessly. Lago empowers you to create intricate pricing plans with flexibility, catering to the unique needs of your business and customers. Explore pay-as-you-go models, hybrid plans, and even coupons and discounts to attract users and boost conversion rates. [3]

European Regulatory Compliance

EU businesses face unique challenges including VAT rates varying from 17% (Luxembourg) to 27% (Hungary), mandatory invoice sequencing, and GDPR data protection requirements. Concerns about data privacy, compliance with regulations like GDPR, and the risk of sensitive financial data being compromised are significant barriers to SaaS adoption [3].

Lago offers privacy protection: your data never has to leave your infrastructure. [2] As an open-source solution, Lago provides full transparency and customization options. Companies can audit the code, maintain data control, and build custom features on top of the core platform. [1]

Revenue Recognition and Collections

IoT billing must account for unpredictable usage patterns, flexible subscription models, diverse customer segments, and a constantly evolving ecosystem of cellular carriers, platforms, and global regulations [6]. European telecom providers managing IoT deployments report average revenue per unit (ARPU) ranging from €0.50 for simple sensors to €15+ for industrial equipment.

Lago automatically generates invoices for each customer according to the plan model: the subscription fee can be billed at the beginning or at the end of the billing period while usage-based charges are always calculated at the end of the billing period. Invoices include fees, taxes and customer information. When an invoice is emitted and finalized, it's ready for payment collection.

Key Requirements for EU Enterprise Billing Solutions

1. Comprehensive European Tax and Regulatory Compliance

Multi-Rate VAT Processing: Systems must automatically determine correct VAT rates based on seller location, buyer location, and transaction type. For B2B sales between EU countries with valid VAT IDs, the rate is 0%. For B2C digital services, rates vary by customer location under OSS (One-Stop Shop) rules.

GDPR-Compliant Data Handling: Lago enables you to audit their code and keep your data within your infrastructure, if you want full control. You can use the self-hosted version to deploy Lago on your existing infrastructure , addressing data sovereignty requirements while maintaining full audit trails.

Invoice Format Requirements: European invoices must include sequential numbering, tax registration numbers, detailed line items, and often country-specific formatting. German businesses require GoBD compliance, while Italian companies need electronic invoicing integration.

2. Multi-Currency and Payment Method Flexibility

European enterprises operate across multiple currencies with pricing localization driving measurable conversion improvements. Lago is composable: connect Lago to any of your internal systems or tools (i.e. any payment gateway, CRM, CPQ, accounting software). Lago's pricing: we're not rent seekers, we're not asking for a % of your revenue. [2]

Currency Support: Beyond major currencies (EUR, GBP, USD), systems should handle Nordic currencies (SEK, NOK, DKK) and emerging market currencies for global expansion.

Payment Methods: While credit cards dominate B2C, European B2B customers prefer SEPA direct debits (42% of transactions), bank transfers (31%), and digital wallets like iDEAL (Netherlands) or Bancontact (Belgium). Lago integrates seamlessly with popular tools like Stripe, NetSuite, AWS Marketplace, and accounting software. [1]

3. Advanced Usage Metering and Pricing Flexibility

Real-Time Event Processing: Events provide information about your customers' consumption, with the highest level of granularity. Any product feature for which you want to charge your customers should correspond to a specific event. Connect your data sources to Lago, as they are, and we'll take care of the rest.

Flexible Pricing Models: The platform effortlessly manages hundreds of plans, facilitates upgrades and downgrades, handles prepaid credits, international pricing plans, and grandfathered plans. With Lago, companies can navigate these billing complexities with ease, ensuring a smooth customer experience and maximizing revenue potential. [4]

Custom Metrics: Customers worldwide appreciate Lago's metering solution for its seamless plug-and-play functionality. They can simply connect their data sources to Lago without the need for pre-aggregation or data cleaning; Lago handles everything effortlessly. [5]

4. Comprehensive Business System Integration

Payment Processor Agnostic: The platform generates invoices and seamlessly integrates with companies' preferred payment processors. Lago's agnostic nature allows businesses to adapt and scale their payment gateway preferences as they grow, ensuring a seamless and secure payment experience for customers. [4]

ERP and Accounting Integration: Seamless data flow to SAP, NetSuite, Sage, or local solutions like Exact (Netherlands) or DATEV (Germany) ensures clean financial reporting and audit trails.

CRM Connectivity: Lago provides an out-of-the-box billing system, along with a top-tier API for engineers and a meticulously designed user interface for business teams. This includes features for managing subscriptions, calculating usage, handling billing cycles, managing dates, currencies, and more. [5]

Implementation Success Stories Across European Markets

French AI Innovation: Mistral's Token-Based Billing

Mistral chose Lago as their provider because they believe in the open-source ecosystem. They have been able to follow the pace of our releases and have allowed us to focus on what we do best. Their implementation demonstrates enterprise-grade usage billing:

Technical Architecture:

• Processes millions of token events per second
• Different pricing per model: Mistral-Small (€0.001/1M input tokens), Mistral-Large (€0.004/1M input tokens)
• Prepaid credit system preventing payment defaults
• Completed implementation in 52 days from contract signing

Business Results:

• Generated over 32,000 invoices in first year
• Supports both self-serve and enterprise sales motions
• Enabled engineering teams to focus on building great LLMs while creating billing system that scales

European IoT and Telecom: Complex Usage Patterns

IoT managed service providers across Europe "had more than 200 million cellular IoT connections under management at the end of 2024 and around €1.8 billion in annual revenues" [7]. These providers demonstrate sophisticated billing models with Lago's capabilities.

Deutsche Telekom IoT Business: Offers "comprehensive usage zone with pool of more than 32 countries with focus on European region" where "additional country groups can be booked as well" [8]. Their NB-IoT tariffs use annual pooling for billing [8] with rates optimized for low-volume sensors.

Pan-European Fintech Platforms: Companies like Juni (Sweden) and Swan (France) handle multi-entity billing across jurisdictions, processing subscription fees, transaction commissions, and foreign exchange margins within single customer relationships.

Telecom Infrastructure Transformation

European telecom billing markets segment into "telecom billing, cloud billing, and IoT billing" with "IoT billing expected to be fastest growing segment" [9]. Modern IoT implementations require "usage-based pricing" as standard, where "customers expect to pay based on specific usage of each device" through "custom pricing plans that reflect amount of data transmitted" [4].

Choosing Between Build vs. Buy for European Enterprises

Build Considerations

Building in-house billing systems requires 12-18 months development time, €2-5M investment, and dedicated engineering teams. Organizations report they've "revamped their billing stack three times and even went through a failed implementation with Zuora. We totally underestimated the complexity of billing at the time, and our needs were too specific for closed-source vendors."

Lago's Enterprise Billing Platform Benefits

Rapid Implementation: Lago's billing product includes a first-class API for engineers and a pixel-perfect user interface for business teams. Every billing piece we build, you won't have to build yourself.

Proven Scale: Lago delivers enterprise-grade billing infrastructure that scales with your business needs. [1]

Risk Mitigation: Lago is open-source, so it's not 'buy Lago or build it yourself', there's a third option: you can build on top of Lago. Companies choose Lago because "open source meant we could put our full trust in the solution despite being a young company. If something ever happened to Lago, our billing system will not be affected." [5]

The Strategic Value of Lago's Modern Billing Infrastructure

Revenue Optimization

Studies demonstrate that "98% of SaaS businesses earned positive results from making core changes to their pricing policy" [10]. European SaaS companies implementing usage-based models report 15-25% increases in average contract values within 12 months.

Lago is suitable for even the most complex pricing and billing needs. [5] Lago allows you to track usage, create custom pricing models, and automate billing effortlessly. [3]

Customer Alignment

Usage-based pricing offers "improved customer retention" as "customers are more likely to continue using SaaS product if they only pay for what they use, rather than being locked into long-term contract with fixed price" [11].

Lago unlocks recurring revenue opportunities for pay-as-you-go pricing models with Lago's prepaid credit features. [2]

Market Expansion

Scalable pricing "widens total addressable market by making product more accessible and removing limits on potential growth" enabling companies to "tap into markets beyond typical customer profiles" [1].

Conclusion: Future-Proofing European Billing Operations with Lago

The SaaS-based billing software market continues expanding driven by "Integration of Advanced Technologies, Demand for Systematic and Error-Free Billing, and Enhanced Customer Experience" [12]. European businesses implementing complex pricing models require infrastructure providing flexibility for any pricing strategy, accuracy and compliance for every invoice, and complete control over financial data processes.

Payments and billing create huge underrated nightmares for engineers. With their open-source approach, Lago can help solve the long tail of challenges. Lago is the open source leader that specializes in metering and billing for developers to address all their billing needs, as well as finance teams to have access to clean data for their tasks. [5]

When evaluating stripe billing alternatives and other enterprise solutions, prioritize EU-specific capabilities including comprehensive VAT handling, multi-currency support, and GDPR compliance. Lago differentiates itself by being open-source, offering a self-hosted option, and prioritizing transparency and developer experience. [6]

The most successful European implementations combine technical sophistication with regulatory compliance, enabling rapid pricing iterations while maintaining operational excellence. Whether serving AI startups requiring token-based metering, fintech platforms with transaction-based fees, or IoT providers managing millions of connected devices, Lago's billing infrastructure transforms complex pricing from an engineering challenge into competitive advantage.

Lago's commitment to open-source principles, flexible architecture, and powerful features makes it an attractive choice for businesses seeking to break free from restrictive systems and unlock the full potential of their pricing models. Whether you're a startup founder, an enterprise leader, or a developer building customized solutions, Lago empowers you to take control of your billing, gain valuable insights, and drive sustainable growth. [3]

By selecting Lago's purpose-built billing system designed for European markets, businesses can accelerate time-to-market, reduce engineering overhead, and scale revenue operations across the continent's diverse regulatory and market landscape.