PhonePe app work with the concept of Unified Payment Interface (UPI). It is a payment method initiated by the National Payments Corporation of India (NPCI) with the support from Reserve Bank of India and Indian Banks Association (IBA). It avoids the traditional online transfers using Account Name, Account Number, IFSC code.,etc., With UPI, its enough if you know the recipient's Virtual Payment Address (VPA). It can be said that UPI payment method is an advanced version of IMPS ( Immediate Payment Service ). As of today, 29 banks have agreed to use this service. Your bank could be one of them.
In this payment method accounts from all the banks and mobile numbers are at one place. When the SMS is sent from your mobile for verification, it finds the details of associated bank accounts as well. So, when you just click on your bank name, it will automatically show your account number. The UPI service uses same network which is used for IMPS transactions. Moreover, a two factor authentication is done for all UPI transactions. For each transaction, your MPIN is verified whether it is matching with your VPA. Only then the transfer happens.