With billions of dollars riding on them, nobody expected the poster boys of the Indian startup scene to place their bets on the wrong horses. While the outcome of the great cashless race is yet to be revealed, those participating have started to feel the first signs of trouble.

And in their defence, it’s not for the lack of trying. Demonetisation was termed demonisation of cash by some, of black money by others, and an open lottery for all those who were trying to make their wallets, payment gateways and hundred other kinds of cash-alternatives, work.

Yes, it provided a huge boost. The sudden disappearance of cash from the economy meant force fitting of these companies into customers’ lives. What once started as an online wallet service is now recording more transactions than the next three competitors combined, by offering modes to pay everyone – from the vegetable vendor on the roadside to your favourite international airline. Others in the race, meanwhile, are either left playing catch up or busy finding the next gold mine before the government blows it up with its most potent foot soldier—BHIM.

The situation for private players, however, is far from grim. Most of them are still celebrating, parties still happen in the choicest of Bangalore pubs with venture capitalists and film celebrities in attendance in equal numbers, and the conversations at digital payments conference like the 50p in Bangalore’s MLR convention centre still revolve around jargon such as UX/UI, chargeback, ping-backs and sometimes, piggybanks.

Thus, it was nothing less than a rude shock for those in the audience — mostly people building their own payment solutions who had gathered for wisdom from the stalwarts of customer acquisition and cash burn — to hear that no matter what happens, cash remains the king and that’s the reality that they live in.

What changed between tall claims of November to cold harsh truths of January, I wondered. And the first part of the answer was right in front of me — a picture of the prime minister adorning a techie’s MacBook wallpaper.

What started as a love affair between the PM and proponents of annihilation of cash has now come to be a rather bumpy relationship. As is common with most tales of heartbreak, it’s the unexpected entry of a third entity that has left a bittersweet taste. With the launch of the BHIM app, its parent National Payments Corporation of India, as well as the government have made clear their intentions — elephants are set to roam in the free markets.

And unsurprisingly, those with business models which tried to compete with rusty IMPS and NEFT transfers are now having to get in the ring with a much more agile counterpart.

“We built this app three-four years ago when UPI was not even around and nobody knew about IMPS,” said Anoop Shankar, founder of payments app Chillr which is now trying to find a way to integrate UPI into its app and realign its model with the government’s grand vision.

A similar situation is being faced by another startup founder from Singapore who came to the conference in the hope of finding solutions to tackle the UPI beast, which poses the dual dilemma of not only being a strong competitor but also being out of bounds for many, as the access to UPI infrastructure is limited to banks.

“If the government was serious about actually having a free market, they would not indulge in these protectionist tendencies. They should have allowed interoperability between wallets and killed all meaningless code shipping happening in the name of innovation between me-too payment companies,” he told me.

This was followed by a long rant on how India’s market is super fragmented with more than 100 payment apps working within their closed groups trying to compete with banks, wallets, payment banks, UPI, aadhaar payments, USSD and everything else that could be in the offing.

The above theme played out many times during the second day and it was amusing to say how the impossibility of competing with the government quickly turned into the admission that it’s actually the hardest to compete with cash.

“All statistics are flat. The big jumps in user volumes have faded away and vendors are refusing to accept payments through wallets beyond January 31 as the freebie period ends. The next few months will be the moment of reckoning for all those in this race,” an executive of a major payment gateway told me.

It’s not just the disappearance of high volumes of small value transactions that is bothering the payment companies. The fact that Twitter and discussion boards have become battlegrounds of the less-cash drive and has resulted in active volunteers and engineers to question security and privacy of sharing data with so many entities, is also a hard pill to swallow for, say, a payments aggregator which deals with anywhere between 4-12 entities to make sure you are able to pay Rs. 50 for that sandwich on a food ordering app like Swiggy.

It’s not surprising, then, that a complete session was titled “Everyone Can See Your Card Details. Seriously.” Hosted by Arnav Gupta of Coding Blocks, the talk laid bare the deep, dark secrets of payment companies and the many many ways your data is being collected.

A merchant app like Swiggy takes your order, which is then processed through a payment gateway, which then routes to a card authentication system, which then routes to the bank’s page to make you enter your pin and bam!—you have your sandwich but half a dozen companies potentially know that you had it.

While participants in this big data game defended their position, the concerns raised by a programmer were enough to rattle most of the attendees after which Gupta came up with his solution to remain secure in the online world: cash on delivery.

“The level of security in COD is definitely better than any payment system available right now in the country,” he said and put the first nail in the coffin.

The brief summarisation of these conversations was his: if you can’t make something as secure as cash, don’t attempt it. Then why is everyone trying?

While there are no easy answers, Raj, an entrepreneur trying to make a point-of-sale billing system for the crores of mom and pop stores in the country, put it thus:

“If you are not providing considerable improvement in someone’s business model, then cashless is of no use to him. Even if you force him to display your QR code, he will quickly switch back to cash because we are fighting against a very strong status quo bias where the shopkeeper’s only technology interaction is his calculator,” he said adding that it’s unlikely that a real change will come unless the whole infrastructure is built.

In Raj’s experience, it’s a reality that merchants can’t afford to pay high charges for your innovation unless their incomes rise and on top of that entrepreneurs have to work assuming that even 2G network access comes at a premium — forget 4G.

After this provocation, others didn’t take it lying down and pitched their ideas on how cash can be eliminated by their respective innovative products—ranging from payment gateways that work on phones instead of a card swipe machine, to payments through micro-credit on e-commerce sites.

What’s at stake, you ask? Everything and nothing. Everything because each company is chasing the same set of people — all of us — and nothing, because nobody has a clear answer on how digital payments can work without internet access.

At his honest best, Raj said something in the last five minutes of the conference which is likely to give sleepless nights to many, many people in the days to come:

“No payment company can take off unless they can provide superior value over using cash and I have neither been able to build or even spot such a solution in the market so far,” he concluded.

And then, the horses quickly returned to their stables, with a hope that the harsh track becomes amenable to cruising soon.