PhonePe is expanding UPI access to feature phone users through UPI 123PAY, allowing people without smartphones or active internet connections to send and receive digital payments. The initiative uses technology acquired from conversational engagement company Gupshup and is designed to bring basic UPI functionality to a large segment of Indians who still rely on feature phones. PhonePe’s service supports capabilities including peer-to-peer transfers, merchant payments and offline QR payments.
The move builds on UPI 123PAY, the feature-phone payment system launched by the Reserve Bank of India and the National Payments Corporation of India in 2022. PhonePe acquired Gupshup’s GSPay technology stack in June 2025 and said it would customize the platform for new feature phones in India. PhonePe’s current UPI terms also describe UPI123 PAY as a feature that enables users to send and receive money through feature phones without an internet connection or smartphone.
PhonePe Brings UPI To Feature Phones
PhonePe’s feature-phone initiative is aimed at extending digital payments to users who do not have access to smartphones.
The company acquired the GSPay technology stack from Gupshup to develop its feature-phone UPI solution. GSPay was built on top of NPCI’s UPI 123PAY framework for feature phones.
PhonePe said the technology would be customized and extended to provide core UPI services on new feature phones.
PhonePe Feature-Phone UPI At A Glance
| Feature | Details |
|---|---|
| Company | PhonePe |
| Payment system | UPI 123PAY |
| Technology acquired | GSPay |
| Original technology provider | Gupshup |
| UPI infrastructure | NPCI |
| Smartphone required | No |
| Internet connection required | No for UPI123 PAY |
| P2P transfers | Supported |
| Merchant payments | Supported |
| Offline QR payments | Supported for compatible phones |
| Balance checking | Supported |
| Transaction history | Supported |
| Maximum transaction mentioned by PhonePe | ₹10,000 per transaction |
PhonePe’s terms say UPI123 PAY users can enable one bank account at a time on a feature phone and make payments using a QR code on camera-enabled phones or through a VPA/mobile number.
What Is UPI 123PAY?
UPI 123PAY is an RBI-backed system designed to make UPI available to people using feature phones.
The Reserve Bank launched UPI 123PAY in March 2022, alongside DigiSaathi, a 24×7 digital-payments helpline.
At the time, the RBI said India had more than 400 million feature-phone mobile subscribers, highlighting the potential size of the underserved market.
The system was designed to overcome one of the biggest barriers to smartphone-based UPI: the requirement for a data connection and smartphone app.
UPI 123PAY Technology Options
| Method | How It Works |
|---|---|
| Feature-phone app | UPI functions through an app on compatible phones |
| IVR | User calls a predefined number and follows voice instructions |
| Missed call | User initiates a missed call and receives a callback |
| Proximity sound | Payment information is exchanged through sound-based technology |
The RBI identified these four options when UPI 123PAY was introduced.
How PhonePe’s Feature-Phone Payments Work
The PhonePe implementation is built around the UPI123 PAY framework.
After registering and enabling the feature, users can conduct person-to-person transactions, make payments to merchants and pay for selected PhonePe services.
For compatible camera-enabled feature phones, QR codes can be scanned.
Users can also use a VPA or mobile number to initiate payments.
Feature-Phone Payment Flow
Feature phone
│
▼
Register on PhonePe
│
▼
Enable UPI123 PAY
│
▼
Link eligible bank account
│
▼
Choose payment method
│
├── QR code
├── VPA
└── Mobile number
│
▼
Enter UPI PIN
│
▼
Payment completed
The exact user interface can vary depending on the feature-phone model and the implementation supported by the device.
No Smartphone Or Internet Required
One of the biggest advantages of UPI 123PAY is that users do not need a smartphone.
PhonePe’s terms explicitly state that UPI123 PAY allows users to send and receive money through feature phones without an internet connection or smartphone.
This makes the service particularly relevant in areas where mobile data access is unreliable or where consumers continue to use basic handsets.
Smartphone UPI Vs Feature-Phone UPI
| Requirement | Smartphone UPI | UPI123 PAY |
|---|---|---|
| Smartphone | Required | Not required |
| Internet/data | Generally required | Not required |
| UPI ID | Yes | Yes |
| Bank account | Required | Required |
| UPI PIN | Required for authorization | Required |
| QR payment | Yes | Supported on compatible devices |
| P2P transfers | Yes | Yes |
| Feature phone compatible | No | Yes |
The technology therefore expands the range of devices that can participate in India’s UPI ecosystem.
India Still Has A Large Feature-Phone Market
PhonePe said India had approximately 24 crore, or 240 million, feature-phone users in 2024.
The company also cited industry estimates of around 15 crore additional feature-phone shipments over the following five years.
India’s Feature-Phone Opportunity
| Indicator | Figure |
|---|---|
| Feature-phone users in 2024 | ~240 million |
| Expected shipments over five years | ~150 million |
| Combined potential market indicator | ~390 million |
| PhonePe’s objective | Expand digital-payment access |
The figures represent users and projected shipments rather than unique consumers, so they should not be interpreted as 390 million individual future users.
Still, they demonstrate why feature phones remain commercially relevant despite the rapid growth of smartphones.
Financial Inclusion Is A Major Goal
PhonePe says feature-phone users have historically been underserved by the digital financial industry and startup ecosystem.
By enabling UPI on basic phones, the company wants to bring more consumers into India’s digital payments network.
The strategy could be particularly relevant for users who have bank accounts but do not regularly use smartphone-based financial applications.
Potential Financial-Inclusion Benefits
| Benefit | Potential Impact |
|---|---|
| Digital P2P transfers | Easier money transfers |
| Merchant payments | Reduced dependence on cash |
| No smartphone requirement | Wider accessibility |
| No internet requirement | Works in limited-connectivity situations |
| Balance checking | Greater account visibility |
| Transaction history | Better payment tracking |
| Smartphone-feature-phone interoperability | Easier transfers between users |
This could help extend digital payment habits into segments that have not fully adopted smartphone UPI.
Feature Phones Can Pay Smartphone Users
PhonePe’s goal is not simply to create a separate payment network for basic phones.
The company wants interoperability between feature-phone and smartphone users.
A feature-phone customer should be able to send money to another UPI user, while receiving money from smartphone users through their mobile number or self-QR.
Feature phone user
│
│ UPI
▼
UPI network
│
├──────────────► Smartphone user
│
└──────────────► Merchant
This is important because consumers do not necessarily use the same type of handset.
Offline QR Payments Expand The Use Case
PhonePe has specifically highlighted offline QR payments as part of its planned feature-phone offering.
That could allow users with compatible feature phones to pay merchants without relying on a conventional smartphone-based QR workflow.
However, “offline” in the context of UPI 123PAY should not be confused with a payment system that requires absolutely no telecommunications connectivity under every implementation.
UPI 123PAY’s IVR and missed-call approaches still rely on cellular voice connectivity, while its various technology options determine how the transaction is initiated and authenticated. The RBI describes UPI 123PAY as a solution for users with limited or no internet connectivity rather than a universal no-network payment system.
PhonePe’s Transaction Limits
PhonePe’s current UPI terms state that transactions using UPI123 PAY are subject to limits prescribed by NPCI and RBI.
The terms currently specify a maximum of ₹10,000 per transaction, while the cumulative daily amount is subject to applicable UPI limits.
PhonePe UPI123 PAY Limits
| Limit | Current PhonePe Terms |
|---|---|
| Maximum per transaction | ₹10,000 |
| Daily cumulative limit | Subject to applicable NPCI/RBI rules |
| Bank accounts enabled at one time | 1 |
| UPI PIN | Required for authorization |
PhonePe notes that these limits can be modified as applicable rules change.
Feature-Phone Users Can Check Balances
The PhonePe implementation is not limited to sending money.
Users can also check their bank account balance and view transaction history through the feature-phone experience.
This adds a basic banking layer to the payment functionality.
Services Available Through PhonePe UPI123 PAY
UPI123 PAY
│
├── Send money
├── Receive money
├── Merchant payments
├── Selected PhonePe services
├── QR payments
├── Balance enquiry
└── Transaction history
The feature set can vary based on the phone, payment method and applicable restrictions.
PhonePe’s Move Builds On India’s UPI Expansion
UPI has grown from a relatively new bank-transfer infrastructure into one of the world’s largest instant-payment systems.
Reuters reported that India’s UPI processed around 24 billion transactions in July 2026, worth approximately ₹29.87 trillion, while the system had around 555 million users.
UPI Scale In July 2026
| Indicator | July 2026 |
|---|---|
| Monthly transactions | ~24 billion |
| Transaction value | ₹29.87 trillion |
| UPI users | ~555 million |
| System type | Instant bank-to-bank payments |
The expansion to feature phones could help UPI reach additional users beyond the smartphone-heavy portion of the population.
PhonePe Is Already Expanding Its Merchant Network
The feature-phone initiative comes as PhonePe continues to expand its merchant infrastructure.
In April 2026, the company said it had surpassed 50 million lifetime registered merchants and that its network covered more than 98% of India’s postal codes.
This creates an important foundation for feature-phone payments.
A feature-phone payment system becomes more useful when users can actually spend money at a large number of merchants.
PhonePe’s Payment Network
| Metric | Latest Company Figure |
|---|---|
| Registered merchants | >50 million |
| Postal-code coverage | >98% |
| Feature-phone user opportunity | ~240 million users in 2024 |
| Core payment network | UPI |
The combination of merchant acceptance and broader device compatibility could strengthen PhonePe’s reach into less digitally served markets.
PhonePe Is Moving Beyond Smartphone Payments
The feature-phone initiative is part of a wider strategy by PhonePe to make payments available through different interfaces.
In February 2026, the company launched biometric authentication for UPI payments, allowing users to authorize transactions up to ₹5,000 using fingerprint or facial recognition on compatible smartphones.
In March 2026, it also launched the PhonePe RuPay On-The-Go Card for transit payments, supporting offline contactless transactions through stored-value functionality.
PhonePe’s Payment Expansion
| Product / Feature | Payment Interface |
|---|---|
| Standard UPI | Smartphone |
| Biometric UPI | Fingerprint / face |
| UPI123 PAY | Feature phones |
| RuPay On-The-Go | Contactless transit card |
| SmartPOD | Merchant POS + payment acceptance |
| AI-powered search | Voice / text commands |
This indicates that PhonePe is attempting to reduce friction across different payment environments rather than relying on a single smartphone app experience.
Feature-Phone Payments Could Help Rural India
Feature phones remain particularly relevant in communities where smartphone ownership, mobile data affordability or reliable internet connectivity may be lower.
UPI123 PAY can address part of that gap because it is designed specifically for feature phones and limited-connectivity environments.
The RBI originally described the service as an initiative to deepen digital financial inclusion.
Potential Rural Applications
| Use Case | Example |
|---|---|
| Person-to-person | Sending money to family |
| Local merchants | Paying neighborhood shops |
| Agriculture | Small payments to suppliers |
| Services | Paying selected bills/services |
| Remittances | Transfers between family members |
| Account monitoring | Balance and transaction checks |
The actual usefulness will depend on network availability, bank participation and feature-phone compatibility.
Security Remains Important
Digital payments on feature phones still require authentication.
PhonePe’s terms state that UPI123 PAY transactions are subject to UPI and regulatory requirements, including applicable transaction limits.
The RBI’s original UPI123 PAY system also incorporated authentication mechanisms such as entering the UPI PIN during voice-based transactions.
Payment request
│
▼
Recipient + amount
│
▼
Authentication
│
▼
UPI PIN / applicable method
│
▼
Bank authorization
│
▼
Payment confirmation
Users still need to protect their UPI PIN and mobile number from fraud attempts.
The GSPay Acquisition Was The Key Step
PhonePe’s move into feature-phone payments became possible through its acquisition of GSPay’s technology stack from Gupshup.
GSPay was already built on NPCI’s UPI 123PAY framework, giving PhonePe a foundation for developing its own implementation rather than building an entirely new feature-phone payment system from scratch.
The company said it planned to customize and extend the technology for new feature phones.
PhonePe Feature-Phone Strategy
Gupshup
│
▼
GSPay technology
│
▼
PhonePe acquisition
│
▼
Customization + extension
│
▼
PhonePe UPI123 PAY
│
▼
Feature-phone users
The strategy also allows PhonePe to connect feature-phone users to its existing UPI merchant and user ecosystem.
PhonePe’s Scale Gives It A Distribution Advantage
PhonePe said in June 2025 that it had more than 600 million registered users, over 40 million merchants and more than 330 million transactions per day on an annualized basis at that time.
Its merchant base has since grown further.
That existing network could help PhonePe make feature-phone payments useful immediately because users can potentially interact with an established UPI ecosystem rather than a small standalone network.
The Bigger Picture
PhonePe’s expansion of UPI123 PAY to feature phones represents an effort to bring digital payments to consumers who remain outside the smartphone-centric portion of India’s fintech ecosystem. The company acquired Gupshup’s GSPay technology to build its feature-phone UPI solution, with support for peer-to-peer transfers, merchant payments, offline QR payments and receiving money from other UPI users.
The opportunity is significant because PhonePe cited approximately 240 million feature-phone users in India in 2024, while the wider UPI ecosystem processed around 24 billion transactions worth ₹29.87 trillion in July 2026, according to Reuters. Extending UPI access to basic phones could therefore expand digital-payment adoption into markets where smartphones or mobile data remain less accessible.
Looking Ahead
The success of PhonePe’s feature-phone UPI strategy will depend on how broadly the service becomes available across handset models, banks and merchant locations. Its current terms allow users to send money, pay merchants, check balances and view transaction history without an internet connection, with a stated maximum of ₹10,000 per transaction. Wider interoperability with smartphone users and PhonePe’s large merchant network could make the service particularly useful for consumers who have bank accounts but continue to rely on basic phones.
More broadly, the initiative shows that India’s digital-payment expansion is no longer limited to increasingly sophisticated smartphones. UPI123 PAY’s IVR, missed-call, feature-phone app and proximity-based options provide multiple ways to bring users with limited connectivity into the digital economy. As UPI continues to scale, extending access across device types could become an important part of the next phase of financial inclusion in India.
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