UPI123: UPI for Feature Phone

  • IASbaba
  • March 10, 2022
  • 0
UPSC Articles
Print Friendly, PDF & Email


  • GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
  • GS-3: Science and Technology- developments and their applications and effects in everyday life. 

UPI123: UPI for Feature Phone

Context: On March 8, the RBI launched a new Unified Payments Interface (UPI) payments solution for feature phone users dubbed ‘UPI123Pay’. UPI, which was introduced in 2016, has become one of the most used digital payments platforms in the country. 

  • The volume of UPI transactions has already reached ₹76 lakh crore in the current year, compared to ₹41 lakh crore in FY21.

About UPI

  • It is a common platform through which a person can transfer money from his bank account to any other bank account in the country instantly using nothing but his/her UPI ID.
  • Launched in 2016 as Mobile First digital payments platform
  • Immediate money transfer through mobile device round the clock 24*7 and 365 days based on the Immediate Payment Service (IMPS) platform.
  • UPI is completely interoperable and as such, it is unique in the world, where you have an interoperable system on the ‘send’ and ‘receive’ side
  • Developed by: National Payments Corporation of India (NPCI) under the guidance from RBI

Significance of UPI

  • It created interoperability between all sources and recipients of funds (consumers, businesses, fintechs, wallets, 140 member banks), 
  • Settled instantly inside the central bank in fiat money – Convenience to consumers and merchants and 
  • Blunted data monopolies -big tech firms have strong autonomy but weak fiduciary responsibilities over customer data).

Challenges of UPI

  • Several structural and technological challenges include cyber-frauds, transaction costs, communication infrastructure, awareness and adoption.
  • Also, at present, efficient access to UPI is available largely via smartphones.

How does the new solution (UPI123) work?

  • The new UPI-based service is designed to bring the digital payments platform closer to a significant number of feature phone mobile subscribers in the country, which is estimated to be more than 40 crores. 
  • Such users could earlier access the digital transactions platform through the USSD based process, using the short code of *99#, which according to RBI is not popular. 
    • USSD-based mobile banking can be used for fund transfers, checking account balance, generating bank statement, among other uses. 
    • The main objective of the innovative *99# payments service is to allow financial inclusion of the underbanked and economically weaker sections of the society, and integrate them into mainstream banking.
  • The USSD-based process is considered cumbersome, with users required to send multiple messages and charged for the same, and not supported by all mobile service providers.
  • With the new UPI123Pay, feature phone users will be required to go through an onboarding process where they have to link their bank account to their feature phone and then set a UPI PIN using their debit card for authenticating transactions. 
  • Once they have completed this initial process, users will be able to use the new UPI facility through one of the four distinct payment options that don’t require an internet connection.

How will users make payments without internet?

  • The UPI123Pay service is a three-step method to initiate and execute services for users, which will work on phones which do not have an option for internet connection. 
  • The new UPI payments system offers users four options to make payments without internet connectivity: 
    • Interactive Voice Response (IVR)
    • App-based functionality
    • Missed call facility 
    • Proximity sound-based payments. 
  • Using the IVR option, users would be required to initiate a secured call from their feature phones to a predetermined IVR number and complete UPI on-boarding formalities to be able to start making financial transactions like money transfer, mobile recharge, EMI repayment, balance check, among others.
  • The missed call facility will allow users to access their bank account and perform routine transactions such as receiving, transferring funds, regular purchases, bill payments, etc., by giving a missed call on the number displayed at the merchant outlet. The customer will receive an incoming call to authenticate the transaction by entering UPI PIN.
  • They could also install an app on their feature phone through which several UPI functions, available on smartphones, will be available on their feature phone, except scan and pay feature which is currently not available.
  • Finally, they could utilise the proximity sound-based payments option, which uses sound waves to enable contactless, offline, and proximity data communication on any device.
  • Users will be able to make payments to their friends and family, pay their utility bills, recharge FASTags, pay mobile bills and also check their account balances,

Do other countries have something similar?

  • Mobile payment systems that do not rely on internet connectivity like the ones based on USSD or SMS technology were introduced many years ago and are still being used in some developing countries.
  • In fact, one of the major mobile payment systems globally was introduced by Vodafone’s Kenyan associate, Safaricom in 2007. 
  • M-PESA, which is Africa’s leading mobile money service, operates across the Democratic Republic of Congo, Egypt, Ghana, Kenya, Lesotho, Mozambique and Tanzania, with 51 million customers making over $314 billion in transactions per year through the service, according to Vodafone.


The launch of UPI123Pay makes facilities under UPI accessible to that section of society which was so far been excluded from the digital payments landscape. In that way, it is promoting great amount of financial inclusion in our economy.

Connecting the dots:

For a dedicated peer group, Motivation & Quick updates, Join our official telegram channel – https://t.me/IASbabaOfficialAccount

Subscribe to our YouTube Channel HERE to watch Explainer Videos, Strategy Sessions, Toppers Talks & many more…

Search now.....

Sign Up To Receive Regular Updates