Rural-centric feature phone solutions set to anchor digital payments push

Govt sources say rural-focused feature phone solutions such as UPI 123Pay, IVR systems and offline payments will drive the next phase of India's digital payments expansion beyond smartphones

Development of rural-focused digital payment solutions tailored for feature phone users is set to anchor the next phase of India’s digital payments expansion, government sources said.

 

According to officials familiar with the deliberations, policymakers are sharpening their focus on ensuring that the benefits of the Unified Payments Interface (UPI) ecosystem extend to users without smartphones, particularly in rural and semi-urban (RUSU) regions.

 

“Smartphone penetration cannot be the sole driver of digital payments growth. We need solutions that are simple, affordable and accessible on basic phones,” a senior government official said. “Financial inclusion in the next phase will depend on how effectively we serve feature phone users and low-connectivity geographies.”

 

 

Among the key measures being emphasised is the National Payments Corporation of India’s UPI 123Pay, which allows users to carry out UPI transactions through feature phones without internet access. IVR-based systems and missed-call-based payment mechanisms are also being pushed to widen access.

 

Innovation in small-value offline payments — including NFC-enabled UPI Lite solutions — is under active consideration to address connectivity gaps in remote areas. Officials said such products could help sustain transaction flows even in low-network zones.

 

At the same time, policymakers have underlined the importance of improving telecom infrastructure. “Offline capability is important, but reliable 4G and 5G connectivity in rural regions remains critical to sustaining transaction growth at scale,” another official said.

 

To enhance usability and trust, the government is exploring deeper integration of regional language interfaces and voice-based confirmations. Leveraging Bhashini — the Ministry of Electronics and Information Technology’s language translation initiative — to enable vernacular access to digital payment platforms forms part of the broader strategy, sources noted.

 

Other proposals under discussion include operationalising UPI Circle to allow delegated payments for secondary users, as well as introducing multi-signatory UPI functionality to facilitate transactions by self-help groups and community-based organisations.

 

Officials also pointed to ongoing policy support measures such as the DIGIDHAN mission, waiver of merchant discount rate (MDR) on RuPay debit card and BHIM-UPI transactions, and incentive schemes for low-value UPI person-to-merchant payments. These measures are aimed at encouraging adoption among small merchants in rural and semi-urban areas.

 

The National Payments Corporation of India, in consultation with government departments and industry stakeholders, is examining these proposals as part of a broader effort to deepen digital transaction penetration beyond urban centres, sources added.

 

Commenting on the policy direction, Rahul Singh, Associate Professor at O P Jindal Global University, said, “India’s next phase of digital payments growth must be rural-first and feature phone-inclusive. Expanding UPI 123Pay, IVR-based systems, offline Lite solutions, and vernacular interfaces can democratise access beyond smartphones. This shift will not only deepen financial inclusion but also catalyse rural entrepreneurship, formalise micro-enterprises, and generate employment by integrating underserved communities into the formal digital economy.”