PhonePe brings UPI payments to feature phones via 123PAY

PhonePe has launched SMS-based UPI payments for feature phones, including in low-connectivity areas. Pre-installed on select Nokia, HMD, Lava and Itel handsets, the service targets more than 20 crore users across rural and semi-urban India, with more device partnerships planned.

— Source publishedMon, 31 Aug, 2026, 17:48 IST·First seen Mon, 31 Aug, 2026, 18:17 IST·Source Inc42 · Buzz

What happened

PhonePe launched UPI 123Pay for feature phones, using SMS-based offline payments in low-connectivity areas. Pre-installed on Nokia, HMD, Lava and Itel devices,

Key facts

  • More than 20 crore feature-phone users targeted
  • UPI transaction volume rose 4% to 23.66 billion in July from 22.72 billion in June
  • PhonePe processed 1,085.8 crore transactions worth ₹14.4 lakh crore in July
  • PhonePe FY26 net loss widened 62% to ₹2,792 crore from ₹1,727.4 crore
  • FY26 operating revenue rose 11.5% to ₹7,920.5 crore from ₹7,105 crore in FY25
  • Voice helpline supports English and 12 Indian languages

Why this matters

Pre-install agreements with Nokia, HMD, Lava and Itel position feature-phone OEMs as strategic fintech channels, creating partnership opportunities around distribution, onboarding and rural financial services.

What to watch

  • Number of supported handset models and OEM partnerships beyond Nokia, HMD, Lava and Itel.
  • 123PAY transaction volumes, active users, repeat-payment rates and rural-versus-urban adoption data.
  • Evidence of merchant acceptance education or feature-phone-specific QR/payment workflows.
  • NPCI policy changes affecting UPI 123PAY limits, authentication, fees or offline-payment capabilities.
  • Competitive launches from Google Pay, Paytm, banks, telecom operators or handset manufacturers.
  • Reports of failed transactions, fraud, SIM-swap abuse or customer-support friction in low-connectivity regions.
  • Expand pre-install agreements with Indian feature-phone OEMs and telecom-linked device distributors.
  • Build assisted onboarding through kirana merchants, banking correspondents and rural agent networks.
  • Incentivize merchants to display feature-phone-compatible UPI acceptance and train users on SMS/payment flows.
  • Use early transaction data to target insurance, recharge, bill-pay, credit and commerce offers to newly active users.
  • Push for broader language support, simpler authentication and offline or low-connectivity transaction reliability.