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.
How Does PhonePe UPI Work Without Internet?
The most important part of PhonePe UPI 123Pay is the way the phone communicates with the payment system.
A normal smartphone UPI application usually needs an internet connection to communicate with the payment company's servers.
PhonePe UPI 123Pay instead uses SMS communication for the feature-phone payment flow.
PhonePe says the system has been designed to work even in areas with limited 2G connectivity. Mobile data or Wi-Fi is not required for normal supported transactions.
The user's bank account is still connected to UPI. Money is not being stored separately inside the feature phone.
The difference is simply how the payment instructions reach the banking and UPI network.
This is why describing PhonePe UPI 123Pay simply as an "offline wallet" would be incorrect. It is still a UPI bank-account payment system. It just does not depend on a normal internet connection on the phone.
Also Read | Global Fintech Fest 2026: PM Modi Heralds the Era of Agentic AI & Global UPI
Which Feature Phones Support PhonePe UPI 123Pay?
PhonePe UPI 123Pay is being bundled with select feature phones from HMD, Nokia, Lava International and itel.
More handset partnerships are expected to follow.
This point matters for customers.
The announcement does not mean every old Nokia, Lava, itel or other keypad phone automatically gets PhonePe.
The PhonePe software currently needs to be supported and installed on compatible devices.
People buying a feature phone specifically for PhonePe UPI 123Pay should therefore check whether that particular model supports the service rather than assuming support based only on the manufacturer's name.
Phones with cameras get an additional benefit because they can support Scan and Pay through UPI QR codes.
People using supported phones without a camera can still make payments through mobile numbers or UPI IDs.
How to Register for PhonePe UPI 123Pay
PhonePe has laid out the registration and payment process for supported devices.
Open the PhonePe application that comes pre-installed on the supported feature phone. Read and accept the terms so the device can be registered. Select your bank from the available list. Enter the last six digits of your debit card and the card's expiry date. Create your UPI PIN. Once registration is complete, the UPI ID becomes active. To make a payment, open PhonePe and choose Scan and Pay, a contact, a mobile number or a UPI ID. Enter or select the recipient, verify the recipient details, enter the amount, type your UPI PIN and confirm the payment. On a camera-enabled phone, you can scan the merchant's UPI QR code before entering the amount and PIN.
The basic flow is therefore close to what smartphone users already know.
The difference is the screen, device and communication method.
How to Make a UPI Payment Without Internet Using PhonePe
At launch, PhonePe UPI 123Pay supports the core functions most people need for everyday payments.
Users can transfer money to another person through a mobile number or UPI ID. They can pay merchants through UPI IDs. Camera-equipped feature phones can scan UPI QR codes.
Users can also check their bank balance and view previous transactions from the PhonePe feature-phone application.
PhonePe's current terms also say a user can enable one bank account at a time for UPI 123Pay on the feature phone.
That is different from the regular PhonePe smartphone experience, where several bank accounts can be linked.
What Happens Next?
The current version is only the first stage.
PhonePe says future updates are expected to add bill payments, mobile recharges and Aadhaar-based UPI onboarding for feature-phone users.
Aadhaar-based onboarding could be particularly useful because the current registration flow uses debit-card information to help set up the UPI PIN.
If Aadhaar onboarding is added, eligible customers could get another route to UPI registration without depending on a debit card.
PhonePe has not announced a final rollout date for these additional functions.
Also Read | NPCI Makes UPI AutoPay Portable: 7 Big Changes to Know
PhonePe UPI 123Pay Transaction Limit
This part requires some clarification because two different figures have appeared around the launch.
RBI increased the wider UPI 123Pay per-transaction ceiling from ₹5,000 to ₹10,000 in 2024. Government information published since then confirms the ₹10,000 limit.
PhonePe's current UPI terms also state that every UPI 123Pay transaction can be up to ₹10,000, subject to applicable rules and any limits imposed by the bank, PhonePe, NPCI or RBI.
However, in an interview immediately after the product launch, PhonePe founder and CEO Sameer Nigam said the new PhonePe feature-phone service was initially operating with a limit of ₹5,000 per transaction and ₹10,000 per day.
For customers, the safest interpretation is this: the UPI 123Pay framework and PhonePe's published terms allow a ceiling of up to ₹10,000 per transaction, but actual limits presented to an individual user may be lower depending on the rollout stage, bank and risk controls.
Customers should follow the transaction limit shown on their device before confirming a payment.
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.
There is another cost to understand: SMS.
Sameer Nigam said 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.
This is separate from the value of the UPI payment itself.
India has also recently changed the policy framework for merchant-side UPI fees on selected higher-value payments. Those rules are separate from the launch of PhonePe UPI 123Pay and should not be confused with a PhonePe feature-phone subscription or registration fee. Person-to-person UPI transfers remain outside the merchant-fee framework.
The timing also makes sense when you look at UPI's size
India's UPI system processed 24.51 billion transactions in August 2026, according to NPCI.
Those transactions were worth approximately ₹29.82 lakh crore, with 752 banks live on UPI during the month. July had recorded 23.66 billion transactions, meaning transaction volume grew about 3.6% in one month.
PhonePe itself remained the largest UPI payment application by transaction volume in August. Published analysis of NPCI app-level data puts PhonePe at about 11.19 billion transactions during the month, representing roughly 46% of UPI payment-app volume.
PhonePe is therefore not trying to prove that UPI works.
It is trying to expand where UPI can work and who can use PhonePe to access it.
News4Bharat readers can also understand the latest UPI privacy changes here: UPI Privacy Rules From September 4, 2026 Explained
What does PhonePe UPI 123Pay mean?
For Customers
For a customer who already owns a smartphone with reliable internet, the feature may change very little.
For somebody who does not own a smartphone, the difference can be much larger.
Until now, the rise of QR payments created a visible divide. A shop could display a UPI QR code, but a customer without a smartphone often still had to pay in cash.
PhonePe UPI 123Pay reduces that gap.
A compatible feature-phone user can pay another UPI user without moving to a smartphone. A rural worker can transfer money through a mobile number or UPI ID. A shopkeeper using a compatible feature phone can receive payments. A customer with a camera-equipped feature phone can scan the same type of QR code used by smartphone customers.
It also gives people another option when internet availability is poor.
This does not mean cash disappears or smartphones become unnecessary. Feature phones have smaller screens, limited input options and fewer services than modern smartphones.
But for basic payments, the device barrier becomes smaller.
For rural and semi-urban India
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?
PhonePe's feature-phone strategy also has a merchant side.
Nigam said the product was influenced by PhonePe's experience digitising millions of merchants, including businesses in rural areas where the owner may not use a smartphone.
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.
There are still limitations. Full merchant tools, dashboards, credit products and other business services may continue to require smartphones or other connected devices.
But the basic act of receiving or sending a digital payment becomes available to a wider group.
For India's fintech industry?
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 most fintech products. Lending apps, investment platforms, insurance services and full banking applications need screens, internet access and more computing power.
Payments are different.
A payment can be reduced to a few pieces of information: who is paying, who is receiving, how much is being paid and whether the customer has authorised it.
UPI 123Pay makes it possible to handle those steps on a simpler device.
That creates a new growth route for banks, payment companies and handset manufacturers.
It also makes handset partnerships more important. Instead of competing only through downloadable applications, payment companies can work with phone makers to put payment capability directly onto devices before they reach the customer.
PhonePe's partnerships with HMD, Nokia, Lava and itel show what that model can look like.
PhonePe UPI 123Pay vs UPI Lite: What's the Difference?
No.
This is an important difference.
PhonePe UPI 123Pay is designed primarily to enable UPI payments on feature phones without requiring a smartphone or internet connection.
UPI Lite is a different UPI product designed for small-value payments using a balance set aside for that purpose.
A user should therefore not treat "UPI without internet", "UPI Lite" and "UPI 123Pay" as interchangeable terms.
News4Bharat has explained the differences between UPI Lite, bank credit lines and RuPay credit-card payments in detail here: UPI Lite, Credit Lines and RuPay Credit Cards Explained
The bigger picture
PhonePe UPI 123Pay is important not because it changes how UPI works at the banking level, but because it changes who can access it.
India already processes tens of billions of UPI transactions every month. The next challenge is no longer simply convincing smartphone owners to scan QR codes.
It is extending the same payment network to people who are still outside the smartphone and mobile-data economy.
By placing PhonePe directly on feature phones, using SMS for transactions, adding QR support where cameras are available and offering voice assistance in 13 languages including English, PhonePe is trying to reduce the device and connectivity requirements for joining UPI.
If handset availability expands and the service proves reliable at scale, the result could be a larger UPI user base among rural customers, small merchants, workers and households that continue to use basic phones.
For millions of such users, the most important change is straightforward.
They may no longer need to buy a smartphone simply to make a UPI payment.
How News4Bharat verified this story: News4Bharat reviewed PhonePe's official UPI 123Pay launch announcement and UPI terms, NPCI's UPI 123Pay documentation, RBI material and current UPI data. Product limits and availability may vary by bank, handset and rollout stage.