UPI and smartphones are moving forward. PhonePe has launched UPI 123PAY for users, allowing digital payments even without internet access. PhonePe CEO Sameer Nigam shares his views on the new feature.
Hello, I am Kriten Walia, and today we have with us PhonePe's Founder and CEO Sameer Nigam. Sameer, thank you for joining us. UPI has transformed the landscape of digital payments in India, but a large part of this revolution hasn't reached people who do not use smartphones or the internet yet. To bridge this gap, PhonePe is now launching UPI 123PAY on a large scale—a facility through which feature phone users will also be able to make UPI payments without internet access. India has over 200 million feature phone users, and PhonePe is the first major TPAP to bring UPI 123PAY to this segment at scale. Could this move prove to be a game changer in connecting crores of cash-dependent people to the digital economy, and will the next big phase of UPI adoption be seen in rural and underserved India beyond smartphones? Today, we have an exclusive conversation on these questions with Sameer Nigam. Sameer, thank you for joining us. First, the biggest question on everyone's mind upon hearing about this facility: what is the concept of this PhonePe UPI 123PAY? How does it work, how different is it from regular UPI, and above all, what will the complete payment experience look like for a feature phone user going forward?
Thank you, Kriten, for having me on your show. We are very excited about this PhonePe feature phone app. We have been working with NPCI and all the other feature phone manufacturers in India for about two years in R&D mode. First, let me explain what this app is. As you might know, around 230 to 250 million citizens in India still use feature phones today. They do not own smartphones or, for some reason, do not want to use smartphones. To bring these citizens onto PhonePe or the UPI network, we built this app.
So, what works on it? First, peer-to-peer payments, which we call money transfers. On the PhonePe feature phone app, you first link your bank account, exactly like you do on a smartphone. You enter the last six digits of your debit card and set up a personal MPIN. After that, you can send money to anyone in your phone's contact book by entering that MPIN, or you can enter any new mobile number, or if you know the recipient's UPI ID, you can enter that to send them money. Peer-to-peer, or P2P payments, via the PhonePe feature phone app will work just like any other TPAP on a smartphone. This is a very common use case, and we believe that if peer-to-peer payments alone take off on feature phones across the country, the next 200 to 250 million Indians will fully join the UPI network. Through this, those of us who are already on smartphones will be able to send money to them, and they will be able to send money to us. That covers peer-to-peer.
Second comes merchant payments, or P2M payments. Around 40% of feature phones made by companies like HMD, Nokia, Lava, etc., already have a camera today. Feature phones that already have a camera can scan any QR code and make offline payments. Even offline, especially in rural areas where QR codes have already reached everywhere, or at the lower end of the market across pushcarts, street vendors, and wholesale markets where QR codes exist, this facility will become available. In the coming months, our effort will be to bring bill payment use cases like mobile recharges, electricity, gas, and FASTag into the PhonePe feature phone app as well. Once these are introduced—peer-to-peer, QR, recharge, and bill payments combined—around 80% of transactions typical of a standard smartphone user will be available on feature phones. For now, all our R&D effort is focused on these use cases.
It seems like a phased plan, Mr. Nigam. When talking about digital payments, one of the biggest questions on everyone's mind is security. Is making payments through UPI 123PAY just as safe as using PhonePe on a smartphone, or is there any difference? What safeguards are currently in place for user security?
To start with, let me say it is completely safe. The longer answer is that in digital payments, two types of safety are required. One is protecting the data moving from your application to the server and to your bank. The other is protecting your PIN and your phone. Whether it is a feature phone or a smartphone, every UPI transaction requires two-factor authentication, and that remains true on feature phones as well. Your SIM must remain with your device, and you have to enter your MPIN every time.
Because feature phones are a new technology layer on which UPI is running, transaction limits are lower. Initially, a limit of 5,000 rupees per transaction and 10,000 rupees daily has been set on the UPI 123PAY protocol. You might remember that when UPI first launched 10 years ago, limits were low back then too, and they were gradually increased over time. Similarly, in the PhonePe app recently launched for feature phones, UPI 123PAY limits are lower. That covers transaction authorization. As for data protection, whatever details you enter inside the PhonePe app are first encrypted at the app level. That encrypted data, known as the payload, is sent over SMS to our server. On the server, only we can decrypt it, because the encryption happens from our app and the decryption happens on our side. It is exactly how UPI works; the only difference is that on smartphones, payments run on the TCP/IP protocol, whereas for feature phones, it runs on SMS or SMPP protocols.
Mr. Nigam, what are your expectations from this segment of over 200 million feature phone users, which is a game-changing aspect of this entire story? Because that is the biggest headline emerging here. Do you think the next big wave of UPI adoption can come from rural and underserved India? Is that possible?
