Walmart-backed fintech company PhonePe has introduced a new service called PhonePe UPI 123Pay. The offering is designed to let users of basic mobile devices conduct digital transactions without needing an internet connection. Company representatives stated that the initiative is intended to reach 200 million+ individuals who use basic mobile handsets.
With this deployment, PhonePe reported that it has become the first major third-party application provider to bring UPI payments to feature phone users at scale. The software functions on an SMS-based architecture, allowing transaction processing in locations with limited 2G connectivity. Users can execute peer-to-peer transfers through mobile numbers or UPI identifiers.
Additionally, individuals can pay merchants via UPI identifiers and QR codes on camera-equipped devices.
Device Partnerships and Setup
The application will come pre-installed on basic mobile devices produced by manufacturers including Nokia, HMD, Lava International, and Itel Mobile, which is owned by Transsion Holdings.
PhonePe stated that it intends to incorporate additional handset partners in subsequent months. To assist individuals with service activation, the firm has established a voice-first, AI-powered helpline providing support in English and 12 Indian languages.
Registration takes place directly on compatible basic handsets. Users choose their bank, input the final six digits alongside the expiry date of their debit card, and establish a UPI personal identification number.
Sameer Nigam, founder and chief executive officer of PhonePe, noted that bringing UPI to basic handsets through this system extends the advantages of digital payments beyond smartphones to all regions of the country. For background, UPI 123PAY was launched in 2022 to enable UPI transactions on feature phones. That system operates primarily on Interactive Voice Response technology with automated transaction processing.
Technology Acquisition and Financial Results
To enter this sector, PhonePe acquired GSPay, the proprietary technology belonging to Gupshup, in June 2025. At that time, the business shared intentions to adapt the newly purchased intellectual property to deploy its own UPI-based payment solution for basic mobile devices. The release coincides with digital payment organizations seeking to widen UPI usage beyond smartphone owners, particularly in rural and semi-urban areas where smartphone availability and dependable internet access stay inconsistent.
According to figures published by the National Payments Corporation of India, total UPI transaction volume increased 4% to 23.66 Bn in July from 22.72 Bn in June. PhonePe and Google Pay maintained their dominant positions within the UPI ecosystem during this period. PhonePe handled the highest volume at 1,085.8 Cr transactions, with a value of ₹14.4 Lakh Cr during the month.
Regarding corporate developments, PhonePe submitted an updated draft red herring prospectus with the Securities and Exchange Board of India for an initial public offering in January.
The enterprise subsequently paused its public listing plans in the following months, pointing to instability in global equity markets. Financial disclosures for the year showed that the net loss for the fintech major expanded by 62% in FY26 to ₹2,792 Cr compared to ₹1,727.4 Cr in the preceding fiscal year. Meanwhile, operating revenue climbed 11.5% to ₹7,920.5 Cr during the review period, up from ₹7,105 Cr in FY25.
