Hello and welcome. UPI has fundamentally changed the way India pays, from urban consumers to small merchants. Smartphones and QR codes have made digital payments almost seamless, but there is still a large section of India that remains outside this digital payment purview. They are the feature phone users across rural and semi-urban India. The proposition is simple but significant: enabling users to make UPI payments without a smartphone and without an internet connection. PhonePe has officially announced the launch of PhonePe UPI 123PAY, extending UPI payment capabilities to feature phone users across India without the need for an internet connection. For PhonePe, this is not just about adding another payment product; it is about taking UPI to consumers who have so far remained largely dependent on cash. With this launch, PhonePe becomes the first major third-party application provider to bring digital payments to India's 200 million-plus feature phone users. This marks a milestone in deepening financial inclusion and bringing underserved, cash-reliant communities into the mainstream digital economy. To know more about the product and how PhonePe UPI 123PAY could become an important next step in the evolution of India's digital payment story, I have with me Mr. Sameer Nigam, founder and CEO of PhonePe. Welcome, Sameer, and thank you for joining us today.
Thank you so much for having me on your show.
Let me begin by telling my viewers that PhonePe recently completed 10 years since the app went live. Many congratulations to Sameer on reaching this important milestone. Sameer, how challenging and how fulfilling has this journey been so far?
It's everything we ever imagined 10 years ago and so much more—the failures, the success, the scale, the reach. We never imagined that 700 million Indians would have tried the app. Hundreds of millions of customers use the app every day, so yes, it is every founder's and every employee's dream come true. There is a lot of satisfaction.
Tell us about the new feature that you launched today. How is your new feature, UPI 123PAY, different from the existing standard UPI?
It is different in two or three ways. First, as you probably know, most feature phones today do not have data or internet connectivity, but SMS works on all of them. So, starting over two years ago with NPCI and then subsequently with OEMs like HMD, Lava, Nokia, itel, and others, we have been doing R&D on how to build safe, encrypted digital payments over SMS protocols and SMDB protocols. This PhonePe feature phone app is the manifestation of that two-year effort, allowing you to safely make UPI payments. Second, many people believe this is solely a rural India problem, but it is not just rural India. Many senior citizens never transitioned to smartphones by choice—either they were not used to them or did not see the need, so they did not make the switch. Many senior citizens actively use feature phones.
Third, and this is interesting, nowadays many Gen Z users and young kids who need to stay in touch, attend tuitions, classes, or school are given starter feature phones or smart feature phones by their parents. These have cameras but no apps. So these are three distinct demographics: rural India, senior citizens, and our kids. Our endeavor is to make basic payment capabilities accessible to everyone. Within the app, you can do peer-to-peer payments or money transfers. You can send money to anyone in your contact book, to any mobile number, or to any UPI ID. Similarly, anyone can send money to your mobile number or UPI ID, so you can both send and receive money. Second, you can check your bank balance. Third, if your phone has a camera, you can scan any QR code. Fourth, a QR code is assigned to you—a self QR code—so delivery personnel, small cart vendors, or rural shopkeepers with feature phones can display their QR code directly on their screen for others to scan and pay using either smartphones or feature phones. The vision is to first bring all feature phone users into the UPI ecosystem, expand the market so they can transact among themselves and with us, and make them active participants in this UPI revolution.
You explained very well how this will work. But if we look at small kirana stores, small rural merchants, or senior citizens, they are still heavily dependent on cash payments and feel cash is much easier than getting into UPI. How much acceptance do you expect for this product, given that preference for cash?
Our experience over the last 10 years shows a gap between what we assume in urban centers and what is actually happening across the country. Let me explain. For smartphones, while people assume usage is concentrated in cities, today nearly 70% of PhonePe's 700 million-plus lifetime users are beyond Tier 2 cities. If you look past Tier 3 into rural India, more than half of our users are there. Wherever users have smartphones, whether urban or rural, they use digital payments—the data shows this clearly. Second, when UPI originally launched, users adopted it first, and merchant QR acceptance came later. But in rural areas, the reverse is true now. Since the COVID period, PhonePe and other industry players have deployed QR codes in small village shops over the last six to seven years. In our network of 50 million merchants, over 10 million are in Tier 5 and Tier 6 rural areas. These shopkeepers already have QR codes, but the cash dependency persists because rural customers simply lacked the means to make UPI payments. That is the exact problem we are solving: once customers can pay the shopkeeper digitally, the shopkeeper will also transact digitally.
What are your expectations from this segment, and how do you intend to expand this?
