PhonePe Launches PhonePe UPI 123Pay to Bring Offline Digital Payments to 200M+ Feature Phone Users in India

PhonePe has launched PhonePe UPI 123Pay, enabling UPI payment capabilities for India’s 200 million feature phone users without requiring an internet connection. This move marks the first time a major third-party application provider has extended these services to non-smartphone users, targeting a massive underserved demographic to drive deeper financial inclusion across the country.

What was announced

PhonePe UPI 123Pay is designed to function on a proprietary technology stack that utilizes a robust SMS-based architecture. This ensures that transactions can be completed even in rural or semi-urban areas where 2G connectivity is limited or internet access is non-existent. The service is launching as a pre-bundled application on handsets from Nokia, HMD, Lava International, and Itel Mobile—a Transsion Holdings brand—with plans to partner with additional manufacturers in the coming months.

The platform supports a variety of transaction types, including peer-to-peer (P2P) transfers using mobile numbers or UPI IDs, and peer-to-merchant (P2M) payments via UPI IDs. For feature phones equipped with cameras, the system also supports QR code scanning for "Scan & Pay" functionality. Beyond simple transfers, users can manage their accounts, check balances, and view transaction histories directly on the device. To assist with the transition, PhonePe has deployed a voice-first, AI-powered helpline that supports English and 12 Indian languages, providing conversational guidance rather than traditional IVR menus. Upcoming updates to the service are expected to include bill payments, mobile recharges, and Aadhaar-based onboarding onto the UPI ecosystem.

"Over the last decade, UPI has completely transformed how India pays–a journey PhonePe is proud to have built alongside it from day one. As we reflect on how far we have come, the logical next step is expanding the horizon even further and unlocking what’s next. Bringing UPI to feature phones through PhonePe UPI 123Pay extends the benefits of digital payments beyond smartphones to every corner of the country. To us, this is what building for India actually means- meeting people where they are to drive a truly universal wave of financial inclusion that will onboard the next 300 million users into the digital financial fold."

Sameer Nigam, Founder and CEO, PhonePe.

The companies involved

PhonePe is a leading digital payments platform in India, having established itself as a dominant force in the Unified Payments Interface (UPI) ecosystem. The company has a history of building infrastructure to support large-scale digital adoption across the Indian market. Its partners for this launch include Nokia, a global telecommunications veteran, and HMD, the company that manufactures and markets Nokia-branded mobile devices.

Also involved is Transsion Holdings, the parent company of Itel Mobile, which maintains a significant presence in the budget and feature phone segments across emerging markets. Lava International, another key partner, is an Indian multinational electronics company that focuses on smartphones and feature phones. By integrating with these manufacturers, PhonePe is positioning its UPI 123Pay solution directly into the hardware layer of the devices most commonly used by India's "next billion" users, moving beyond the app-store model that defines the smartphone economy.

What FF News has reported before

FF News has tracked PhonePe’s expansion into various financial verticals and security layers. In March 2026, the publication reported on the PhonePe Launches ‘On-The-Go’ Card for Seamless, Offline Payments for Transit, which similarly targeted offline payment use cases. The company’s focus on the "missing middle" of the Indian economy was also highlighted in August 2025 through the story HDFC ERGO in Partnership with PhonePe, to Offer an Affordable Health Insurance Solution to India’s ‘Missing Middle’. Additionally, the firm’s commitment to transaction security was evidenced in early 2025 when PhonePe Unveils Device Tokenization Solution for Secure Card Transactions was announced to protect card data.

What this means

This announcement represents a strategic pivot in the Indian fintech landscape, shifting the battle for market share from the saturated smartphone demographic to the 200 million users still relying on feature phones. By removing the internet requirement, PhonePe is effectively challenging the "digital divide" that has previously limited UPI's reach. This move puts significant pressure on other major third-party application providers to develop similar offline-capable architectures or risk being locked out of the rural and semi-urban merchant ecosystem. The success of this initiative will likely depend on the reliability of the SMS-based architecture under high volume and the effectiveness of the AI voice assistant in navigating complex regional dialects.