PhonePe brings UPI payments to feature phones via offline SMS service
PhonePe has launched UPI 123Pay for feature phones, enabling peer-to-peer transfers and merchant payments through an SMS-based, low-connectivity service. Pre-installed on select Nokia, HMD, Lava and Itel handsets, it targets more than 20 crore feature-phone users, particularly in rural India.
What happened
PhonePe launched UPI 123Pay for feature phones, enabling offline SMS-based transfers and merchant payments. Pre-installed on Nokia, HMD, Lava and Itel devices,
Key facts
- More than 20 Cr feature phone users targeted
- Service supports English and 12 Indian languages
- UPI volume rose 4% to 23.66 Bn transactions in July from 22.72 Bn in June
- PhonePe processed 1,085.8 Cr transactions worth ₹14.4 Lakh Cr in July
- FY26 net loss widened 62% to ₹2,792 Cr
- FY26 operating revenue rose 11.5% to ₹7,920.5 Cr
Why this matters
Pre-installs with Nokia, HMD, Lava and Itel position PhonePe to pursue additional OEM, telecom and rural-distribution partnerships that can create a defensible offline-payments ecosystem.
What to watch
- Number of feature-phone models and OEMs carrying the service as a default pre-install.
- Feature-phone UPI registrations, monthly active users, transaction frequency and repeat-payment rates after 30, 90 and 180 days.
- Share of transactions completed through merchant payments versus peer-to-peer transfers, recharges and bill payments.
- Rural merchant acceptance and payment-success rates in low-connectivity districts.
- NPCI, RBI, bank or telecom changes affecting SMS/IVR-based UPI authentication, pricing, transaction limits or offline-payment rules.
- Competitive launches or OEM partnerships from Google Pay, Paytm, banks, telecom operators or other UPI apps.
- Customer-support volume, fraud reports and reversal rates associated with feature-phone payment flows.
- Expand pre-install agreements beyond the initial Nokia, HMD, Lava and Itel device base, with emphasis on low-cost handset models sold through rural retail channels.
- Bundle feature-phone UPI activation with assisted onboarding through kirana stores, mobile retailers, banking correspondents and PhonePe merchant agents.
- Use first-payment incentives and targeted education to establish recurring use cases such as mobile recharge, bill pay, remittances and local merchant payments.
- Push merchant-side messaging that clarifies how feature-phone customers can complete UPI payments, reducing cashier confusion and failed-payment risk.
- Cross-sell activated users into insurance, savings, credit-adjacent and commerce services where regulation, consent and underwriting permit.
- Monitor fraud, SIM-swap, social-engineering and failed-transaction patterns; trust failures could disproportionately damage adoption among first-time digital-payment users.