PhonePe launched PhonePe UPI 123Pay on 31 August 2026, enabling India’s more than 200 million feature phone users to make Unified Payments Interface (UPI) transactions without internet. The service uses a secure Short Message Service (SMS) based system that works even with limited 2G connectivity. With this launch, PhonePe has become the first major Third Party Application Provider (TPAP) to bring full UPI capability to basic phones at this scale.
What is UPI 123Pay?
UPI 123Pay is a suite of solutions developed by the National Payments Corporation of India (NPCI) to let feature phone users access UPI without internet or a smartphone. UPI, which stands for Unified Payments Interface, was launched by NPCI in 2016 as an instant real time payments system linking multiple bank accounts through a single mobile application. NPCI, established in 2008 as an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association, is headquartered in Mumbai and operates UPI as India’s flagship retail payments platform.
Before UPI 123Pay, feature phone users could only use UPI through NUUP, the National Unified USSD Platform with the short code *99#, launched in November 2012. That USSD based service was seen as slow and cumbersome and did not gain wide popularity. To address the gap for more than 40 crore feature phone subscribers, RBI Governor Shaktikanta Das launched UPI123Pay on 8 March 2022 along with a 24x7 digital payments helpline called DigiSaathi (toll free numbers 1800-891-3333 and 14431). The name 123Pay reflects the simple three step idea of call, choose and pay.
UPI 123Pay allows both feature phone and smartphone users to perform a range of transactions without internet, including peer to peer transfers, merchant payments, bill payments, FASTag recharge and balance enquiry. It supports two factor authentication like regular UPI and works in 12 languages including Hindi, English, Tamil, Telugu, Kannada, Bengali and Malayalam, so users can complete payments in their preferred language.
PhonePe Brings UPI 123Pay to Feature Phones
PhonePe, the Bengaluru headquartered digital payments company launched in 2016 and led by founder and Chief Executive Officer Sameer Nigam, announced PhonePe UPI 123Pay as a dedicated service for feature phones. The company, which had reported more than 71.5 crore registered users and a network of over 5 crore merchants as of July 2026, said it is the first major TPAP to extend UPI to this segment at national scale. The initiative is aimed at onboarding the next 300 million users into the digital payments fold.
The service is built on PhonePe’s proprietary technology stack for feature phones. In 2025, PhonePe had acquired the GSPay technology stack from conversational engagement firm Gupshup, which was already built on the NPCI UPI 123PAY framework, and then customised it for its own feature phone application. Unlike smartphone apps that depend on mobile data, PhonePe UPI 123Pay uses a robust SMS based architecture that keeps transactions reliable even where only basic 2G signal is available.
For rollout, PhonePe has partnered with handset makers including Nokia, HMD, Lava International and Itel Mobile (Transsion Holdings). The application comes pre-bundled on select models such as HMD 105 2G, HMD 110 2G, Nokia 105 Classic, Nokia 105 Single SIM, Nokia 105 Dual SIM, Nokia 106 and Nokia 123 Shield, with more models to be added in the coming months. On supported phones with a camera, users can also scan UPI QR codes, a feature that was not part of the original 2022 UPI 123Pay design.
Core functions available at launch include peer to peer (P2P) transfers through mobile numbers or UPI IDs, peer to merchant (P2M) payments through UPI IDs or QR codes, checking account balance and viewing transaction history. Upcoming updates will add utility bill payments, mobile recharges and Aadhaar based onboarding using Aadhaar OTP, so users without a debit card can also create a UPI PIN.
To help first time users, PhonePe has introduced a voice first, AI powered helpline that guides users step by step through activation and payments. The support is available in English and 12 Indian languages, moving beyond rigid menu driven Interactive Voice Response (IVR) flows to conversational assistance.
How to Register and Pay Using SMS
Registration does not require a smartphone or internet and is done entirely on the feature phone. Users open the pre installed PhonePe app on the feature phone and accept the terms and conditions to complete device binding. Next, they select their bank from the list displayed and enter the last six digits of the debit card along with its expiry date for verification. Finally, they set a UPI PIN, after which the UPI ID becomes active and ready for payments.
To make a payment, users open the PhonePe app and choose Pay to Mobile Number, Pay to UPI ID or Scan and Pay on camera enabled phones. They enter the recipient detail, verify the name displayed, enter the amount and UPI PIN, and press OK to confirm. A confirmation screen then shows whether the payment was successful. The entire exchange travels as encrypted SMS messages between the phone, the bank and NPCI, so no data pack is needed.
Four Methods to Make Offline UPI Payments
The underlying UPI 123Pay framework defined by NPCI offers four technology alternatives for offline payments. All require the user’s mobile number to be linked to the bank account. Customers can link only one bank account at a time on UPI 123Pay, they must deregister the current account to add another.
| Method | How It Works |
|---|---|
| IVR Based Payment | Users call pre defined IVR numbers such as 080 45163666, 080 45163581 and 6366200200. After selecting a language, they follow voice prompts, choose the service, enter beneficiary details, amount and UPI PIN using the keypad to complete payment. |
| Missed Call Based Payment | Users give a missed call to the number displayed at the merchant outlet. The system creates a token with mobile number and bill amount. The user then receives a callback to authenticate the transaction by entering the UPI PIN. |
| App Based Functionality (OEM App) | A native UPI app installed on the feature phone by the handset maker. Developed in partnership with payment providers, it offers most UPI functions like regular apps in a simplified interface. PhonePe’s SMS based app is the current example of this model. |
| Proximity Sound Based Payment | Uses sound waves for contactless offline data transfer. Users call the IVR number, select Pay to Merchant, tap the phone on the merchant’s sound box device, press hash when they hear the unique tone, then enter amount and UPI PIN. Developed with technology partners such as ToneTag and UltraCash. |
All four methods use Dual Tone Multi Frequency (DTMF) signalling and UPI’s standard two factor authentication. Users can switch languages mid transaction through the IVR menu, and the service works on GSM phones. There are no transaction fees for UPI 123Pay.
What are the Limits and Charges for UPI 123Pay?
A key question for users and for factual recall is the amount that can be sent through UPI 123Pay without internet.
At launch, the per transaction ceiling for UPI 123Pay was ₹5,000 with a daily cap of ₹1 lakh. To widen use cases, the Reserve Bank of India announced on 9 October 2024, in its Statement on Developmental and Regulatory Policies, that the per transaction limit would be doubled to ₹10,000. The NPCI issued a circular on 25 October 2024 asking all live UPI 123Pay members, including banks and service providers, to implement the higher limit with immediate effect and achieve full compliance by 1 January 2025.
The circular also introduced additional reforms for the offline channel. These include a new purpose code 86 to tag all UPI 123Pay transactions for better tracking, Aadhaar OTP based onboarding so users can register without a debit card, and the implementation of UPI Number functionality through integration with the UPI Numeric ID Mapper, which lets users receive money using just a phone number.
Alongside this, RBI also raised limits for UPI Lite, the small value wallet based offline product. The UPI Lite wallet limit was increased from ₹2,000 to ₹5,000 and the per transaction limit from ₹500 to ₹1,000. UPI Lite transactions do not require a UPI PIN for each payment and do not hit the remitter bank’s core banking system in real time, which makes them faster for very small purchases. UPI 123Pay, in contrast, continues to require the UPI PIN for every transaction for security.
There are no charges for UPI 123Pay transactions for customers, the same as regular UPI.
How Does UPI 123Pay Compare with UPI Lite and *99#?
Users often look for differences between offline UPI options. The table below compares the three main non smartphone friendly products.
| Feature | UPI 123Pay | *99# (NUUP) | UPI Lite |
|---|---|---|---|
| Launch | 8 March 2022 by RBI and NPCI | November 2012 by NPCI | September 2022 as an on device wallet |
| How to Access | IVR call, missed call, OEM feature phone app, sound based proximity | USSD code *99# with text menu | Wallet loaded from UPI app on smartphone |
| Internet Needed | No, uses SMS, voice or sound | No, uses USSD | No for spends, but needs internet to load wallet |
| Device | Feature phones and smartphones | Feature phones on GSM networks | Smartphones |
| Languages | 12 languages | 12 languages | App dependent |
| Per Transaction Limit | ₹10,000 (from 9 October 2024) | ₹5,000 | ₹1,000 |
| Overall Limit | ₹1 lakh per day | ₹5,000 per transaction, bank set daily cap | Wallet cap ₹5,000 |
| Authentication | UPI PIN for every payment | UPI PIN | No PIN for small payments from wallet |
| QR Scan | Available on PhonePe feature phones with camera | Not available | Available |
In simple terms, *99# is the oldest USSD text menu system, UPI 123Pay is the voice and app based upgrade that works on basic phones with SMS, and UPI Lite is a smartphone wallet for tiny daily spends without PIN. For feature phone owners without data, UPI 123Pay is designed to be the main channel, while smartphone users can use all three as per need.
Why This Launch Matters for Financial Inclusion
The significance goes beyond a new app feature. India still has an estimated 200 million to 400 million feature phone users, a large share of them in rural and semi urban areas where smartphone penetration and reliable data remain patchy. Though nearly 95 percent of villages now have 3G or 4G coverage, affordability and digital literacy keep many users on basic phones. Without internet based UPI, these households depended heavily on cash for person to person transfers, shop payments and utility expenses.
Financial inclusion means bringing such excluded sections into the formal financial system so they can save, transfer and pay securely. UPI already processes more than 500 million transactions per day and crossed ₹20 lakh crore in monthly value in 2025, but its reach was mainly through smartphones. Extending UPI to keypad phones helps farmers, small traders, daily wage workers and older citizens make instant bank to bank transfers, receive payments and check balances without visiting a branch.
For the payments ecosystem, PhonePe’s move carries weight. PhonePe is the largest TPAP on UPI, handling about 45 to 48 percent of total UPI volume and value. In July 2026, it processed over 10.86 billion transactions worth about ₹14.4 lakh crore. Bringing its distribution and brand to feature phones can quickly scale adoption where only nine banks and providers supported UPI 123Pay earlier. It also aligns with Digital India, launched in July 2015 by the Ministry of Electronics and Information Technology, and the Reserve Bank’s Financial Inclusion Index and National Strategy for Financial Inclusion, which measure access, usage and quality of financial services.
By enabling larger ₹10,000 transactions offline, UPI 123Pay now covers use cases such as agricultural inputs, school fees, rent and micro business payments that earlier exceeded the ₹5,000 cap. The SMS channel, supported by multi language voice guidance, reduces dependence on agents and strengthens direct bank access for remote communities.
The Way Forward
PhonePe has said the current launch is only the first phase. The roadmap includes adding bill payments and mobile recharges, improving QR based merchant payments on camera enabled keypad phones and rolling out Aadhaar OTP based registration so users can create a UPI PIN without a debit card. Integration with the UPI Numeric ID Mapper will also make phone number based receiving simpler.
At the ecosystem level, NPCI expects all member banks to fully adopt the new ₹10,000 limit, the purpose code 86 tagging and the Aadhaar onboarding flow. Wider handset partnerships beyond Nokia, HMD, Lava and Itel will decide how fast the service reaches the 200 million base. Other large TPAPs such as Google Pay and Paytm have not yet launched similar feature phone offerings, so adoption will depend on competitive rollout.
If supported by sustained awareness campaigns and the AI helpline, the feature phone channel could narrow the digital divide without waiting for smartphone upgrades. Success will be measured by active offline users, success rates of SMS based transactions and the ability to keep the service free, secure and available 24 by 7 on all holidays, like regular UPI.
Key Takeaways
- PhonePe UPI 123Pay was launched on 31 August 2026 for feature phone users without internet, using an SMS based architecture that works on limited 2G connectivity.
- UPI 123Pay was originally launched by RBI and NPCI on 8 March 2022 for more than 40 crore feature phone users as an alternative to the cumbersome *99# USSD service from 2012.
- The service offers four offline methods, IVR call (numbers 080 45163666, 080 45163581, 6366200200), missed call, OEM feature phone app and sound based proximity payments, available in 12 languages.
- The per transaction limit for UPI 123Pay was raised from ₹5,000 to ₹10,000 on 9 October 2024 by RBI, with full compliance by 1 January 2025, and daily limit remains ₹1 lakh.
- PhonePe has partnered with Nokia, HMD, Lava International and Itel Mobile, pre bundling the app on models like HMD 105 2G and adding a voice first AI helpline in English and 12 Indian languages.
- PhonePe, founded in 2016 and led by Sameer Nigam, had over 71.5 crore users and is the largest TPAP on UPI, which itself was launched by NPCI in 2016 and is headquartered in Mumbai.
