Explained: Will UPI payments via feature phones benefit digital payment firms?

“UPI is the single largest retail payment system in the country in terms of volume of transactions (14 crore transactions per day, October 2021),” said RBI in a statement.

The Reserve Bank of India (RBI) in its monetary policy meet, mentioned its decision to launch a UPI-based payment product for feature phone users on Wednesday. UPI refers to Unified Payments Interface — a system that connects multiple bank accounts into a mobile app. Feature phones on the other hand are basic phones, with voice calling and text messaging sometimes with internet options as well. RBI is trying to expand the product’s reach and make the process simpler for banking institutions in India. Currently, there’s no such technology except BHIM to make payments without the use of an internet connection. As a result, it restricts the usage of UPI as a regular payment mechanism. RBI further aims at an on-device wallet to conserve banks’ resources and to promote digital currency nationwide. This will also promote investments at a wide level.

According to the latest data, digital players PhonePe and Google Pay are the biggest with 43.9% and 35% of payments via UPI, respectively. Further overtaking the Paytm Paymens bank in the peer to peer market. However, speaking of the effect of this initiative on these companies, it might not hamper their market, it instead aims at another segment of society that is comparatively ignorant to use the UPI methods. Furthermore, once the habitat of digital transactions gets instilled among the masses, the platform can be switched depending upon its advertising and features available in it.


However, experts and analysts have emphasised on the fact about the smartphone industry bringing the largest chunk on the table currently and in the future as well. The recent move to enable UPI payments will undoubtedly add to some contribution in the market, however, the move is unlikely to disrupt the industry in a bigger picture. “A big chunk of transactions comes from the smartphone users. The feature phone payment option will precisely target a smaller audience as the smartphone industry in the country is already on a boom and not much can be accounted from the new feature,” said an expert on the matter.

“UPI is the single largest retail payment system in the country in terms of volume of transactions (14 crore transactions per day, October 2021). One of the initial objectives of UPI was to replace cash for low-value transactions. Transaction data analysis shows that 50% of transactions through UPI were below ₹200, indicating its success. These low-value transactions, however, utilize significant system capacity and resources, at times leading to customer inconvenience due to transaction failures because of issues related to connectivity.” RBI said in its statement.