No Small Change: Pay-as-You-Go Usage Models

By Samuel Greengard  |  Posted 2014-10-20 Email Print this article Print
pay-per-use models

As long as data isn't misused or abused, what could be fairer than paying for products and services based on actual consumption rather than aggregate models?

One of the intriguing and largely unexplored aspects of digital technology is how it's shaping and reshaping the way we think about money. Forget Bitcoin, PayPal, Square and Apple Pay. They're simply the mechanisms by which currency travels from one device to another. The Internet of things—along with the ability to monitor actions, reactions and interactions—introduces incredible capabilities.

BBC reports that a comedy club in Barcelona now charges guests based on how often they laugh. A facial recognition system attached to the back of each seat detects laugher and patrons cough up .30 euros per chuckle. So far, the system has resulted in a €6 increase per visitor, while getting a generally positive reception. The price is capped at €24.

Meanwhile, pay-as-you-go usage models are redefining everything from car and house rentals to insurance. Zipcar, Uber and Airbnb are nothing short of disruptive.

I've been using a free Metromile device in my car for the past several months. It tracks my mileage and offers an accurate readout of how much I'm spending on gasoline per trip.

But the company also has an ulterior motive: It hopes to sell me auto insurance by the mile. That something I've so far resisted—despite the fact that it estimates a $480 annual saving.

Health care fee models will also undergo fundamental changes. Fitbits, Jawbones and the forthcoming Apple Watch collect basic health and wellness data. It won't be long before insurance providers charge consumers based on their vitals and stats. Those who are overweight and in poor health will pay more than someone who is fit and healthy.

As long as data isn't misused or abused, what could be fairer than people paying for products and services based on actual consumption patterns rather than vague aggregate models?

Of course, it's possible to take the pay-per-use concept too far and apply it to the wrong things. For example, some hotels now charge guests an extra fee for checking in early. Seriously? If a room is already empty and ready for guests, why should hotels attempt to grab a few extra dollars instead of boosting long-term brand image and loyalty?

And then there's the money-for-nothing category. It's no secret that crowdfunding sites such as Kickstarter have transformed startup funding. I honestly don't understand the appeal for those providing the funding (Comedy Central series South Park concurs), but I'm probably missing something that the 6,911 backers pledging $55,492 for potato salad understand on a far deeper level.


Samuel Greengard is a contributing writer for Baseline.


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