The 5 biggest pricing challenges in Fintech—and how m3ter can help

Fintech has seen exponential growth over the past decade; a trend expected to continue. McKinsey predicts a threefold increase in growth compared to the overall financial services sector, reaching a valuation of $400 billion by 2028. The explosive growth of these companies, led largely by the proliferation of smartphones and data, has meant superior consumer experiences and exciting new products. Underpinning this growth are value-driven pricing models – typically, fintechs deploy usage-based pricing out of necessity: because of  the volume-based nature of their products (for example, selling transactions, ID checks or authentications) requires it. 

These usage-based pricing models create a new challenge: you have to set up billing and pricing operations to support complex calculations and large amounts of usage data. Often, this leads to clunky manual processes, error-strewn billing, revenue leakage, and a whole lot of wasted time. Pricing and billing optimization is the way forward—and it’s simpler than you think. 

Matching pricing with monetization

Fintechs handle a huge amount of data. For usage-based pricing, the data then needs to be processed in order to accurately calculate customer bills. For example, payment companies may create pricing thresholds based on the volume of transactions. Fraud detection services, like Onfido, can charge users for each ID verification and fraud check. 

As products have matured and expanded, bundling services in one offering has risen in popularity. So have hybrid pricing models, which offer usage-based tiers sold as an on-going subscription. These custom packages tend to require complicated calculations to then create an accurate bill each month. These bills are often executed manually. 

But whether fintechs use pure usage-based billing or a hybrid model, the effectiveness of any pricing strategy hinges on the capability of systems and data to seamlessly execute processes from quote to cash, especially with customers expecting near-real time billing insights. So how can fintechs use technology to make pricing and billing optimization a reality? 

Enter m3ter—a cutting-edge solution designed to address fintech pricing and billing pain points. m3ter’s Pricing Operations Platform integrates into your Customer Relationship Management (CRM) system, financial systems, and your actual product itself to streamline billing processes.. Here’s how we can help with some of the most pressing issues.

Challenge 1: Slow and inaccurate billing

Fintechs often face challenges with slow and inaccurate billing, owing to systems that are not built for usage-based pricing. These systems typically lack automation and rely on manual calculations, which become more difficult with high data volumes and complex pricing models. Even if a company automates some steps, usage data is often processed out of sync and out of order, leading to difficult and slow month-end reconciliation. These issues don’t just waste company resources and increase the risk of revenue leakage; billing errors erode customer satisfaction and trust which can lead to churn.

How m3ter can help:

m3ter automates the billing process, shortening billing cycles and reducing errors. Inherent to this is that we integrate into your existing systems. Our software will pull usage data from your product, as well as account and pricing data from your CRM and CPQ systems, sending up-to-date, accurate bill line items to your downstream finance system. In other words, once a customer signs their contract, the entire quote-to-cash process is automated ensuring fast and accurate billing from day one. 

This is especially helpful to businesses that have a range of complex usage-based pricing scenarios. For example, the fraud detection platform Sift struggled with a cumbersome billing process involving usage-based tiers, bundling multiple metrics and complex billing scenarios. Some customers prepaid for their service, others required individual or corporate billing.

“There were a lot of issues within the old software,” says Shelly Glassic, Senior Manager of Revenue and Accounting Operations at Sift. “We had unexplained discrepancies in our subscription data, there were duplications, and customer usage would be doubled. So we'd have to go in and check everything manually every month.” 

m3ter helped Sift cut the manual processes, reducing their month-end billing period by two days. “We were told by some of the biggest players in the market that certain things can’t be done, so to hear that m3ter can do it all sounded too good to be true. But it is true,” she says.

Challenge 2: Lack of interoperability with legacy infrastructure

A lack of interoperability can cause issues for fintech companies relying on legacy and custom-built infrastructure. When these systems don’t communicate with each other, processes become notoriously slow. For example, CRMs often won’t communicate with internal billing systems, meaning finance teams need to manually input data for each customer contract. To keep the system running, fintech companies often find themselves spending a large amount of resources constantly having to rebuild and maintain internal systems as their company and its pricing evolves. This can:

• Cause service disruptions and delays.
• Introduce unnecessary manual tasks (especially when it comes to data migration.)
• Take engineers and product teams away from customer-facing initiatives.
• Complicate compliance and security.

How m3ter can help

Because m3ter integrates seamlessly into your existing finance systems and CRMs, you won’t need to rebuild or replace your tech stack to make changes to your systems and processes. In fact, you don’t even need ongoing engineering support. m3ter can handle the complexity and supports every variation of subscription and usage-based pricing models.

For example, take a look at Onfido, a SaaS and RegTech company. Their legacy platform was designed to handle up to 10 million events per month. By the time it reached 25 million, the platform was so strapped that engineers had to take time off their primary jobs to help with audits. Once Onfido integrated m3ter with Salesforce, they were able to condense their entire month-end process into a single day and reduce revenue leakage by tens of thousands of dollars per month.

“Trying to reconcile contract data in Salesforce versus usage data elsewhere was very difficult. Being able to rely purely on Salesforce for commercial data is huge,” says Gordon Laing, Senior Company Operations Manager at Onfido.

Challenge 3: Difficulty changing, testing, and experimenting with pricing and plans

The inflation-led funding crunch facing fintech means that monetization and pricing are one of the most effective levers companies can pull. Unfortunately, it can be difficult to change, test, and experiment with different pricing models and plans—especially in an economically challenging environment. 

Add to this systems that must communicate swiftly and accurately to create reliable usage-based pricing—some systems don’t communicate at all— and moving customers freely between tiers (and even just creating those tiers in the first place) is often complex and time consuming. Add-ons and overages are regularly left out of automatic billing processes and added manually, which unnecessarily increases the workload and leads to reconciliation errors that require more lengthy manual processes to fix. Sales teams often don’t know what products their accounts are using or if they have the potential to upsell, which affects potential organic growth.

How m3ter can help

One of m3ter’s vital strengths is the way it enables companies to experiment with pricing without breaking their existing infrastructure. You can test new pricing changes against historic data to assess their suitability. Once you’ve made a change, you have flexibility to automatically apply it to customers however and whenever you want—whether you grandfather customers onto their old plan or set a date and change the plan at the point of renewal. It no longer needs to be a headache for your finance team; it’s automatic.

Challenge 4: Need for sequential rating of usage data

Fintech systems can aggregate data, but they often struggle to rate it; applying the pricing logic in the correct way to calculate customer bills from the data. A good rating system is necessary when you’re working with pricing structures that involve tiered rates, fixed components, and caps. For example, in order for a payments provider to bill customers properly and efficiently, they need each customer transaction rated in the order they occurred. 

This is also important for compliance and auditability. If you don’t know when a transaction happened, how can you pull the data to reconcile errors or pass a SOX audit? Many fintech companies continue to struggle through error-riddled and lengthy manual processes as a result.

How m3ter can help

m3ter is designed to rate billions of usage events (e.g. transactions) in near-real time, allowing companies to seamlessly and accurately bill consumers, without any of the manual calculations that slow down the process and complicate audits. It also gives customers near-real time insights on their own usage. There’s full end-to-end visibility, from the raw usage data to invoice.

Like many fintechs, Onfido struggled with audits prior to integrating m3ter. “Our auditors and customers would ask how we got certain calculations and it would take a full squad of people to trace back through the logic in the system to explain it,” Laing says. “Reconciling the data was painful every time.” 

Now, Onfido has full, end-to-end visibility. “We can go in and see the calculations on any given day and any given product,” Laing says. 

This type of transparency doesn’t just streamline the billing process and improve auditability. It also builds customer trust and empowers sales teams to take action as customer usage waxes and wanes.

Challenge 5: Difficulty creating product bundles

Packaging and bundling is rising in popularity within the fintech industry, but systems still struggle because the process involves merging multiple types of usage events or products to create one offering. Oftentimes, for companies relying on older systems, each new bundle is subject to the same clunky roll-out process as an entirely brand new product. This makes it difficult for fintech businesses to remain competitive, scale, and meet their customers’ needs.

How m3ter can help

m3ter’s seamless integration and ability to ingest and process multiple event types simultaneously makes bundling easy—even in situations that are exceedingly complex. It has the capability to support fully customized products and packages for each customer, while helping to avoid SKU proliferation.

Bottom line

Fintech systems tend to struggle with the data requirements of usage-based pricing. Yet, most modern fintech companies implement some form of it. m3ter’s goal is to help eliminate these pricing and billing pain points with seamless integrations and near-real-time access to client usage data. This improves transparency and customer service, frees up resources, and creates opportunities to quickly package and launch new products and bundles. If you want to discuss how m3ter can help your fintech company, talk to our team for a demo.