Explained: What is UPI123Pay, RBI’s new payments service for feature phones?


The unified payments interface (UPI) service, which was limited to smartphones to date, will be now available for feature phones without internet, courtesy the Reserve Bank of India’s (RBI) UPI123Pay.

The service is expected to benefit 40 crore feature phone users and is likely to increase digital financial inclusion, especially in the rural parts of the country. The initiative is “envisioned to accelerate the process of digital adoption in India, by creating a richer and inclusive ecosystem that can accommodate larger sections of population,” the RBI said.

The impact of the move

UPI, as a mode of payment, has become one of the most popular methods, comprising more than half the retail payments in the country. However, the offering by NPCI is limited to internet-enabled smartphones. Also, interestingly, 78% of merchant payments via UPI for the month of February were of less than Rs 500 in value, while for peer-to-peer payments, 59% were worth less than Rs 500. This points towards a trend of UPI being mostly used for smaller retail transactions.

The availability of the service on feature phones without an internet connection could help it penetrate into rural areas of the country, enhancing financial inclusion and digital adoption, while also driving payments’ volumes on the platform.

According to RBI Governor Shaktikanta Das, UPI recorded more than 450 crore transactions worth Rs 8.26 lakh crore in February 2022, almost double when compared to a year ago. In 2022-21, the total value of transactions was around Rs 41 lakh crore. In the current fiscal, the total volume of transactions is Rs 76 lakh crore.

“This move is designed to increase digital penetration of financial services and help people at the bottom of the pyramid, who cannot afford smartphones, to participate in UPI transactions. It will thus bring a majority of them into the digitisation fold,” Anand Kumar Bajaj, the founder and CEO of PayNearby, said. He added: “As it does not require internet connections, it will empower regional rural markets to join the digital payments bandwagon.”

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How does one use UPI123Pay?

UPI123Pay is a three-step method to initiate and execute services for users.

It includes calling an IVR (interactive voice response) number, app functionality in feature phones, missed call-based approach and also proximity sound-based payments. The missed call feature would allow phones to access their bank accounts and perform routine transactions, such as receiving or transferring funds, regular purchases, bill payments, etc. A user just has to give a missed call on the number displayed at the merchant outlet. The customer will then receive an incoming call to authenticate the transaction by entering the UPI pin. The scan-and-pay function of UPI, available on smartphones, is not there on UPI123Pay.

How does it take the UPI programme forward?

Even though UPI can alternatively be accessed through the National Unified USSD Platform using the code *99#, the process has not seen an uptick in adoption or popularity. However, with UPI123Pay, it would reach 40 crore feature phone users in the country, potentially making a material improvement in the way they access the popular payments platform.

The RBI estimates that overall volumes on UPI will touch Rs 100 crore soon and UPI123Pay could play a significant part in it.

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