Hello, I am Kripsveen Walia and today we have with us PhonePe's Founder and CEO Sameer Nigam. Sameer, thank you for joining us. In India, UPI has transformed the landscape of digital payments. But a large part of this revolution has still not reached those who do not use smartphones or the internet. To bridge this gap, PhonePe is now bringing UPI 123Pay on a large scale—a feature through which feature phone users will also be able to make UPI payments without the internet. There are over 200 million feature phone users in India, and PhonePe is the first major TPAP to bring UPI 123Pay to this segment at a large scale. So, can this step prove to be a game-changer in connecting millions of cash-dependent people to the digital economy? And will the next big phase of UPI adoption be seen beyond smartphones in rural and underserved India? Today, we have an exclusive conversation with Sameer Nigam on these questions. Sameer, thank you for joining us. First of all, the biggest question on everyone's mind upon hearing about this feature is: what is the concept behind this PhonePe UPI 123Pay? How does it work, how different is it from regular UPI, and the biggest question, how will the entire payment experience look for a feature phone user going forward?
Thank you, Kripsveen, for inviting me to 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. So first, let me explain what this app is. As you might know, around 230 to 250 million citizens in India are still on feature phones today. They do not have a smartphone today, or for some reason, they simply do not want to use a smartphone. So, to bring these citizens onto the PhonePe or UPI network, we have launched this app. What all works in this? First is peer-to-peer payments, which we call money transfers. On the PhonePe feature phone app, you will first link your bank account, exactly like you do on a smartphone. You will 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 other person's UPI ID, you can enter that and send them money. So peer-to-peer or P2P payments will now run via the PhonePe feature phone app exactly the same way as any other TPAP works on a smartphone.
This is a very common use case, and we believe that if just peer-to-peer payments take off on feature phones in the country, the next 200 to 250 million Indians will entirely enter the UPI network. Through this, those of us who are already on smartphones will also be able to send them money, and they will be able to send us money. So that is peer-to-peer. Second comes merchant payments, or P2M payments. Now, about 40% of feature phones made by companies like HMD, Nokia, Lava, already have a camera today. So, for the feature phones that already have a camera, users can go and scan any QR code to make offline payments. In offline mode, especially in rural areas where QR codes have already reached everywhere, or at the lower end of the market like handcarts, street vendors, and mandis where QR codes are present, this facility will also become available. Then in the next few months, our effort will be to bring bill payment use cases like mobile recharges, electricity, gas, and FASTag to the PhonePe feature phone app. Once these are all combined—peer-to-peer, QR, recharge, and bill payments—about 80% of a standard smartphone user's transactions will be available on feature phones. So for now, all our R&D effort is focused on these use cases.
Right, so this appears to be a phased plan. Mr. Nigam, speaking of digital payments, one major question on everyone's mind is security. Is paying through UPI 123Pay just as safe as using PhonePe on a smartphone, or is there a difference? What safeguards are already in place for user security?
To start with, let me say that it is completely safe. The longer answer is that in digital payments, two types of safety are required. First, protecting the data moving from your application to the server and to your bank. Second, protecting your PIN and your phone. Whether it is a feature phone or a smartphone, there is two-factor authentication on every UPI transaction, and that will remain on feature phones too. Your SIM must stay inside your device, and you will have to enter your MPIN every time. Because feature phones are a new technology layer on which UPI is running, the limits are lower initially. A limit of ₹5,000 per transaction and ₹10,000 per day has been set on the UPI 123 protocol. You might remember when UPI first launched 10 years ago, limits were low back then too, and they were gradually increased. Similarly, for the PhonePe app that has now launched for feature phones, the UPI 123 limits are lower. So that covers transaction authorization. Second, for data protection within the PhonePe app, whatever details you enter are first encrypted by us at the app level. That encrypted data payload goes 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 end. This 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 the SMS or SMPP protocol.
Mr. Nigam, regarding the game-changing aspect associated with this whole story—the segment of over 200 million feature phone users—what are your expectations? Because that is the biggest headline emerging from this. Do you believe the next big wave of UPI adoption can come from rural, underserved India? Is that possible?
First of all, if you look at who owns and buys feature phones today, it is quite popular in rural India, that is true. But it is also very popular among senior citizens; many senior citizens haven't shifted to smartphones and don't want to. And surprisingly, nowadays among Gen Z and Gen Alpha, there is a new trend where they are avoiding smartphones. A lot has been written about this in Europe, the US, and India—that Gen Z and Gen Alpha are stepping away from social media and their starter phone is a feature phone. So these are three completely different cohorts, but they share one common habit: they use phones to talk, they send SMS, and they do transactional tasks. They don't do much shopping on them. We believe payments are an identical utility. If you can make payments from a feature phone, if that facility is provided and it is secure, we believe a lot of people will use it. That is why, just as we took a bet on UPI 10 years ago, this time we are betting on UPI for feature phones. How well it does, only time will tell. But all research suggests that if we educate and build awareness through you, other media, and the government—going village to village explaining how it works—it can really take off.
