Why flexibility is the future of energy billing

The UK energy sector is under growing pressure to balance financial resilience with fairness and flexibility for consumers. With household energy debt reaching £4.8 billion in Q1 2026, suppliers are grappling with rising wholesale costs while customers face increasing financial strain. At the same time, income volatility is becoming the norm - around 25 million people in the UK now earn unpredictably - creating a mismatch between rigid billing cycles and real-life cash flow. The introduction of Recurring Pay by Bank, a new payment method that went live across the industry with a new scheme launch at the start of June, could change this imbalance for good.  

For decades, Direct Debit has been the backbone of energy payments. It remains reliable and widely trusted, but it was designed for a world of stable incomes and steady invoices. For households with earnings that change from month-to-month, fixed collection dates may not always align with when consumers are paid. This could lead to failed payments, penalty fees and mounting arrears. These challenges are particularly acute for financially vulnerable households, many of whom rely on prepayment meters or standard credit and often face higher costs: a phenomenon known as the “poverty premium.” 

Recurring Pay by Bank, enabled by open banking technology, introduces a more dynamic approach. It allows customers to authorise automated bank payments while maintaining greater control over how those payments are made. This aligns with Ofgem’s vision and strategy, to further develop products and services that “make it simple for consumers to engage with flexibility.”  

Consumers using Recurring Pay by Bank can set limits on how much can be collected and align payment timing with their income, reducing the risk of missed instalments and reliance on credit. The result is a more adaptive system that combines automation with the flexibility of account-to-account payments to help people stay on top of essential bills. It also offers a pathway away from higher-cost payment methods, supporting greater financial inclusion.

Energy suppliers stand to benefit as well. Maintaining consistent cash flow is essential to cover wholesale costs and operations. Recurring Pay by Bank helps by reducing failed transactions and providing faster confirmation of funds. It can lower back-office costs, streamline collections and reduce reliance on expensive card payments. Built-in bank authentication strengthens fraud prevention, while balance checks allow suppliers to take a more considered approach to collections. 

This market development also aligns with the UK Government’s National Payments Vision, which sets out a roadmap for a modern, innovative payments ecosystem built on seamless, ubiquitous account-to-account transactions. It aims to improve competition, drive choice and ensure payment systems better reflect how people and businesses operate today. Recurring Pay by Bank is a clear step in that direction, bringing the Vision to life in a practical, high-impact use case. 

Recurring Pay by Bank is not a replacement for Direct Debit, but a long overdue complement. In the future, the two could work in tandem:: Direct Debit provides a stable baseline, while Recurring Pay by Bank enables flexible “top-up” payments. This gives customers greater control without sacrificing predictability for suppliers, and could be especially valuable for households currently using prepayment meters. 

With more than 80% of UK current accounts already capable of supporting Recurring Pay by Bank - and consumer adoption growing - the foundations are firmly in place. For the energy sector, embracing this model offers a route to modernise billing, reduce costs and deliver a more flexible system that reflects how people manage money today.