PhonePe has taken UPI beyond smartphones.
The digital payments company has introduced PhonePe UPI 123Pay, allowing people using supported feature phones to send money and make UPI payments without mobile internet or Wi-Fi.
The service works through an SMS-based system and is being pre-installed on select feature phones from Nokia, HMD, Lava International and itel. PhonePe says more handset manufacturers will be added in the coming months. The company is targeting more than 200 million feature-phone users in India who may not have access to smartphones, mobile data or reliable internet connectivity.
This means a person with a compatible keypad phone can link a bank account, create a UPI ID, send money to another person, pay a merchant, check a bank balance and view transaction history without downloading the regular smartphone PhonePe app.
For phones that have a camera, users can also scan a UPI QR code and pay a shop in much the same way a smartphone user does.
The launch is important because UPI has become one of India's main payment methods, but access to UPI has still been closely linked with smartphones and internet connectivity.
That gap is what PhonePe is trying to address.
What Is PhonePe UPI 123Pay?
PhonePe has launched its own implementation of UPI 123Pay, a payment system created for people who use feature phones.
UPI 123Pay itself is not new. The Reserve Bank of India launched the system in March 2022 to give feature-phone users access to UPI.
At the time, RBI said UPI 123Pay could work through four approaches: an app installed on a feature phone, an interactive voice call, a missed-call system and proximity sound-based payments. RBI introduced it partly because the older *99# service had limited adoption and was not as simple to use.
What is new in 2026 is PhonePe bringing its own feature-phone experience to this system.
PhonePe says it is the first major third-party UPI app provider to extend its payment service to feature phones on this scale.
In simple terms, PhonePe is trying to make a basic mobile phone behave more like a UPI-enabled smartphone for everyday payments.
Distinguishing "No Internet" from "No Mobile Network"
A critical point of confusion regarding PhonePe UPI 123Pay is the definition of working "offline."
A supported feature phone can use the service without mobile data (3G/4G/5G) or Wi-Fi, but it still requires the mobile network connectivity necessary for its supported communication method.
The application relies entirely on an SMS-based communication flow. When a user presses "Pay", the app encrypts the payment instructions and sends them to PhonePe's servers via a standard text message. The server processes the request with the bank and sends an SMS back to the device to confirm the transaction.
Therefore, if a user is in a remote location with absolutely zero cellular network bars—meaning they cannot make a phone call or send a text message—PhonePe UPI 123Pay will not work. The phone must have at least a basic 2G telecom signal to transmit the encrypted SMS.
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Which Feature Phones Support PhonePe UPI 123Pay?
PhonePe UPI 123Pay is not universally available on every keypad phone. It is currently being bundled with specific feature phone models from HMD, Nokia, Lava International, and itel.
It is incorrect to assume that all devices made by a participating manufacturer support the feature. For example, owning an older Nokia 3310 will not grant access to this service.
At launch, HMD India confirmed support for the following specific models:
- HMD 105 2G
- HMD 110 2G
- Nokia 105 Classic
- Nokia 105 Single SIM
- Nokia 105 Dual SIM
- Nokia 106
- Nokia 123 Shield
The application is built into the firmware of these compatible devices. For existing users of these specific models, the service may be activated via an over-the-air firmware update, while new buyers will find the application pre-installed. Users should check the phone's menu for the PhonePe application icon to confirm support.
How to Register for PhonePe UPI 123Pay
Registration mirrors the smartphone UPI onboarding process but is adapted for a keypad interface. The process relies on an initial device-binding SMS to verify the user's mobile number.
- Insert the Correct SIM: Ensure the SIM card registered with your bank account is active in the feature phone and has sufficient SMS balance or an active SMS pack to send the initial binding message.
- Open the App: Launch the pre-installed PhonePe application from the phone's main menu.
- Accept Terms & Bind Device: Read and accept the terms and conditions. The app will automatically send a background SMS to verify your mobile number with the UPI network.
- Select Your Bank: Once verified, choose your bank from the list displayed on the screen. The system will fetch your bank account details linked to that mobile number.
- Verify Debit Card: Enter the last six digits of your bank debit card and the card's valid-upto (expiry) date.
- Set UPI PIN: You will receive an OTP from your bank via SMS. Enter this OTP, then set a secure 4-digit or 6-digit UPI PIN. Once confirmed, your UPI ID is active and ready for transactions.
The 6-Step Transaction Flow
Making a payment on a feature phone is designed to be straightforward. Here is the exact flow for sending money to a mobile number or UPI ID:
- Open PhonePe: Launch the application on your feature phone.
- Choose Payment Method: Select "Pay to Mobile Number" or "Pay to UPI ID" from the main menu.
- Enter Details: Type in the recipient's exact mobile number or UPI ID using the keypad.
- Verify Recipient: The screen will fetch and display the recipient's banking name. Verify this carefully before proceeding.
- Enter Amount & PIN: Type the amount you wish to transfer, followed by your secret UPI PIN.
- Confirmation: Press 'OK'. The app will send an encrypted SMS, and within seconds, display a success or failure screen with a transaction reference number.
Is Scanning a UPI QR Code Available on Every Handset?
No. The ability to use the "Scan & Pay" feature is entirely dependent on the physical hardware of the feature phone.
Only supported feature phones equipped with a rear camera can utilize the QR code scanner. When a user selects "Scan & Pay," the phone's camera activates, allowing the user to scan a standard merchant UPI QR code. For compatible models without a camera (like the basic Nokia 105), this option is either disabled or absent. Users with camera-less phones must rely on entering the merchant's mobile number or UPI ID to complete a payment.
Transaction Limits: RBI vs. Implementation
Transaction limits for feature phone payments require careful distinction, as the regulatory maximum differs from initial rollout constraints.
The Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) increased the overarching transaction limit for the UPI 123Pay framework from ₹5,000 to ₹10,000 per transaction.
However, during the initial launch phase, PhonePe CEO Sameer Nigam confirmed that the PhonePe feature-phone service enforces a stricter limit: ₹5,000 per transaction and a maximum of ₹10,000 per day.
These lower limits are risk-control measures implemented by the app and participating banks to monitor the early adoption phase safely. While the regulatory ceiling allows up to ₹10,000, users will currently hit PhonePe's ₹5,000 per-transaction cap. These limits are subject to periodic review and may be increased to match the RBI ceiling in the future.
Can Users Pay Someone Who Has a Smartphone?
Yes. The UPI network is completely interoperable. The underlying bank accounts and payment protocols are identical, regardless of the device initiating the transaction.
A feature phone user on PhonePe UPI 123Pay can easily send money to a friend using Google Pay on an iPhone, or pay a large merchant using a BharatPe soundbox. The receiver does not need to know that the sender is using a feature phone or an SMS-based app. The funds settle instantly into the recipient's bank account exactly as a standard smartphone transaction would.
PhonePe UPI 123Pay vs. *99# (USSD)
Before UPI 123Pay, the primary method for offline feature phone payments was the *99# USSD service. PhonePe's implementation offers a significantly different experience.
- Interface: *99# relies on dialing a shortcode and navigating through plain-text USSD menus that timeout quickly. PhonePe provides a dedicated application with a visual user interface, making navigation much more intuitive.
- Session Timeouts: USSD sessions frequently drop if the user takes too long to type a PIN. PhonePe's app allows the user to take their time entering details before dispatching the final encrypted SMS.
- Telecom Charges: Telecom operators historically charged users a small fee (e.g., ₹0.50) per *99# USSD session. PhonePe has stated it will bear the cost of the encrypted SMS communication for regular transactions, removing the telecom cost barrier for the end-user (though standard SMS charges may apply during the initial registration SMS).
What Happens if an SMS Fails but the Account is Debited?
Because the system relies on cellular networks, an SMS might drop or face delivery delays after the user enters their UPI PIN.
If the outbound SMS fails to reach the server, the bank is never instructed to move the funds, and no debit occurs. However, if the server processes the payment and debits the account, but the return confirmation SMS fails to reach the user's phone, the device might show a "Pending" or "Failed" status despite the money leaving the account.
In such scenarios, standard UPI dispute resolution applies. The UPI system automatically reconciles mismatched transactions. If the money does not reach the recipient, it is automatically refunded to the sender's bank account, typically within T+2 (Transaction + 2) bank working days. Users can also check their updated balance within the PhonePe feature phone app once network connectivity stabilizes.
Securing a Feature Phone Used for Banking
While feature phones are immune to complex smartphone malware, they are vulnerable to physical theft and social engineering.
- Device Lock: Always enable the handset's physical keypad lock or device password. If the phone is stolen, this acts as the first line of defense.
- PIN Secrecy: The UPI PIN is the master key to the bank account. Never write it down in the phone's contact book or share it with anyone.
- Fake Support Calls: Fraudsters often call claiming to be from "PhonePe Support" or the bank, asking users to forward an SMS or dial a code to "upgrade" their service. PhonePe will never ask for a UPI PIN or OTP over a phone call.
- SIM Security: Because the UPI account is bound to the SIM card, users must report a lost phone to their telecom operator immediately to block the SIM, preventing unauthorized device registration on a new handset.
Does PhonePe Charge for UPI 123Pay?
PhonePe's UPI terms state that it does not charge users for creating a PhonePe account, although its fee policy can change subject to applicable rules. Banks or other payment participants may also apply permitted charges in specific circumstances.
As mentioned, Sameer Nigam stated PhonePe would bear the SMS cost for communication between the PhonePe feature-phone application and its systems during regular use.
Some registration steps, however, can require a verification SMS for linking the bank account. That SMS may be charged according to the user's mobile plan, similar to bank verification on smartphone UPI applications.
The Bigger Picture: Rural and Semi-Urban Inclusion
Digital payments depend on more than the presence of a bank account. A person also needs a usable device, a communication network, and a payment interface they understand.
A smartphone can still be expensive for some households. Mobile data may be unreliable in some areas. Some consumers deliberately continue using keypad phones because they require longer battery life, lower device costs, or simpler controls.
PhonePe's approach accepts that these users may not move to smartphones immediately. Instead of asking the customer to change the device first, the company is trying to bring UPI to the device the customer already understands. That changes the direction of digital inclusion.
For kirana stores and small merchants, the feature-phone strategy is equally important. Feature-phone users can receive payments through a mobile number or UPI address, while camera-equipped devices can handle QR payments. For a small shop, this can reduce the need to maintain a smartphone only for accepting or managing basic digital payments.
PhonePe UPI 123Pay changes an assumption that has shaped India's fintech industry for years: that the smartphone is the default gateway to digital finance. The smartphone will remain the main device for lending apps, investment platforms, and insurance services. But the basic act of receiving or sending a digital payment is now available to a wider group, creating a new growth route for banks, payment companies, and handset manufacturers.
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[PhonePe CEO Sameer Nigam explains UPI 123Pay] This video features the CEO detailing how the SMS-based payment system reaches feature phone users without internet access.
How News4Bharat verified this story: News4Bharat reviewed PhonePe's official UPI 123Pay launch announcement, NPCI's UPI 123Pay documentation, RBI material, and current hardware availability. Product limits and features may vary by bank, handset, and rollout stage.