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Tencent 900b Wechat 259bstreetjournal: It’s been a rollercoaster ride for India’s digital payments. In December of 2016, it seemed that the central bank’s announcement of guidelines for digital wallets was going to open up a floodgate to remittances, mobile banking and government subsidies, just as Prime Minister Narendra Modi made cashlessness a plank of his economic program. Then came demonetization — the currency swap in November 2016 — and it all seemed to unravel.

A new year has started, and digital payments are once again at the heart of a debate about cashless or cash-centric India. The government has proposed a no-cash economy, while businesses and political leaders want to get rid of ATM machines. Some financial firms have been rapidly expanding their payment platforms, while others have been pulled into the fray as regulators step up scrutiny on digital wallet companies.

The outlook for the industry is uncertain – and people involved in it seem to be feeling it.

The India Stack Developer Conference, a three-day event starting Friday in Bengaluru, will put the spotlight on digital payments. A session at the conference led by Sanjay Swamy, co-founder of HAYS India, is set to focus on digital payments for fear-based businesses. “Fear is an important emotion for a business,” Swamy said. “Fear causes the business owner to talk about cash because it’s not very good for the company’s health. … Cash is not bad, but there is a distinction between cash and currency.”

India has a huge young population, growing middle class and an expanding economy – all of which make it an attractive test market for companies looking to roll out new technology. However, for all the enthusiasm about digital payments, India still seems to be pretty much in the same place it was three years ago. (This can be attributed to the fact that India has a population of 1.2 billion people, who are largely unbanked. Even if a large number of them use digital payments, the transaction volumes are not high enough. Moreover, with a large unbanked population, India is seen as a huge ATM for global funds.)

The biggest problem for digital payments in India is that it’s still a business of chicken and egg – no one knows which will come first — consumers or merchants.

“The adoption of digital payments is not going to happen instantaneously,” said Kiran Vaidyanathan, founder and CEO of payment service provider Fino Paytech. “There are issues around education and awareness as well as infrastructure issues that need to be addressed. It is a chicken-and-egg situation.” (My take:Vaidyanathan has been dealing with the issue for over 10 years now, and I trust his opinion more than any others in the industry. The fear of getting into trouble if one catches the wrong kind of eye is real, and it’s a big issue. It’s a problem that needs to be addressed for cashless India to take off.)

While there are fears about digital payments in India, it’s not as if consumers or businesses have stopped using them. The number of wallet users jumped from 98 million in 2016 to 478 million in March 2017.