PhonePe announced on 31 August 2026 the launch of PhonePe UPI 123Pay, a service that enables feature phone users to make UPI transactions without an internet connection. The Walmart-owned fintech said it has become the first major third-party application provider to extend UPI payments to more than 200 million feature phone users in India at scale. The launch is expected to advance financial inclusion in rural and semi-urban communities where smartphone access and reliable connectivity remain uneven.
How PhonePe UPI 123Pay Works
The service runs on an SMS-based architecture that processes transactions even in areas with limited 2G connectivity. It supports peer-to-peer transfers using mobile numbers or UPI IDs and merchant payments through UPI IDs and QR code scanning on camera-enabled devices. Users can also check account balances and transaction histories, with future updates expected to include bill payments, recharges, and Aadhaar-based onboarding.
Registration on a compatible feature phone is designed to be straightforward and does not require a smartphone or internet access. Users open the pre-installed PhonePe app, accept the terms and conditions, select their bank, and enter the last six digits and expiry date of their debit card. After setting a UPI PIN, the UPI ID becomes active and users can begin making digital payments immediately.
Device Partnerships and Voice Assistance
PhonePe UPI 123Pay comes pre-bundled on devices from Nokia, HMD, Lava International, and Itel Mobile, which is owned by Transsion Holdings. The company said additional handset manufacturer partnerships will follow in the coming months. This distribution approach is intended to make the service available to a wide base of feature phone users from the outset.
To help users with setup and activation, PhonePe has launched a voice-first, AI-powered helpline that supports English and 12 Indian languages. The conversational assistant uses advanced speech processing to provide step-by-step activation guidance and answer basic UPI queries. This approach moves beyond rigid IVR menus and aims to deliver a secure and frictionless experience.
Strategic Context and Market Impact
The Reserve Bank of India introduced UPI123Pay as an offline version of UPI in 2022. PhonePe entered this space by acquiring Gupshup's proprietary GSPay technology in June 2025 and has since customized the intellectual property for its own feature phone solution. The launch comes as digital payment companies increasingly target non-smartphone users in less connected parts of the country.
PhonePe continues to hold a leading position in the UPI ecosystem, processing the highest transaction volume of 1,085.8 crore transactions worth ₹14.4 lakh crore in July, according to National Payments Corporation of India data. The new feature phone service could help onboard the next 300 million users into the digital financial fold. It also reinforces the company's commitment to last-mile access across India.
PhonePe has continued to invest heavily in its growth despite wider losses. The company reported a net loss of ₹2,792 crore in FY26, up 62 percent from ₹1,727.4 crore in the previous fiscal year. Operating revenue rose 11.5 percent to ₹7,920.5 crore, which indicates its continued focus on long-term expansion.
PhonePe UPI 123Pay represents a meaningful step toward universal digital payment access for feature phone users. It addresses a significant gap in rural and semi-urban India, where smartphone penetration and dependable internet connectivity remain inconsistent. By building for the devices people already use, PhonePe is positioning itself to drive the next wave of financial inclusion across the country.