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A couple of updates since I wrote this post: 

• My auto workshop owner got his credit card 10 years ago. Like many others, he doesn't know the PIN # and hasn't bothered to contact his bank to get it. He tells me that he regularly charges close to INR 100K (~US$ 1667) per month to his credit card and has never been asked for the PIN # so far. 
• Both my MNOs are back to accepting credit cards and neither of them asks for the PIN # now. 

Not sure how these merchants manage to sidestep the PIN requirement but, for now, the cash-cashless pendulum swings in the other direction.

For the past 4-5 years, my auto insurer in India (BajajAllianz) has been letting customers pay for policy purchase / renewals with credit card entered via telephone keypad using the Interactive Voice Response system you've described. Over 6 years ago, my council in UK (Tower Hamlets) used a more advanced Interactive Voice Recognition system to let me pay my council tax by speaking out my credit card details over the phone.   

From what I know, PCI-DSS does not forbid storage of payment card details by merchant - just that the merchant would need to be compliant with PCI-DSS if it chose to do so. Many merchants store payment details and (hopefully!) have PCI-DSS certification. Merchants who don't store payment card details - and deploy workarounds like Hosted Payment Page on their websites or an IVR technology on their telephone channel - avoid the process presumably to save PCI-DSS certification costs.

A couple of years ago, when I foreclosed many fixed deposits and requested a demand draft for the proceeds, my banker asked me why I was losing interest by prematurely closing my FDs. I replied back saying I needed the money to buy a house. He asked me why I didn't take a mortgage. I replied back that I'd lose the deal if I'd to jump the various hoops required for the bank to approve a mortgage. I thought I'd fobbed him off adequately. But, to my utter surprise, he turned around and promised a loan immediately and to make the disbursement within one hour! 

Under normal circumstances, I would've treated this whole thing as an invasion of privacy and refused to answer the banker's first question. However, on this occasion, I went ahead because I'm fond of this bank (State Bank of India) and have a great respect for almost every employee in its branch.

You're spot on in that banks should exercise caution with their customer engagement approach based on cultural differences. In addition, as my example illustrates, the same customer might behave differently with different banks. 

PS: The hyperlink at the bottom of your post goes to a webinar registration. Is there another link for the report?

We find contractual restrictions to be the most severe impediment to real time marketing. For compliance and other reasons, brands don't allow third party marketing solutions providers to communicate with their consumers without prior approval. This effectively rules out realtime targeted offers and other forms of realtime marketing. I wish I could say with confidence that it's only a matter of time before this hurdle goes away - rising consumer concerns around privacy and safety of personal info suggest that the problem will get worse before it becomes better. 

The problems with legacy systems are well known. Despite that, banks have introduced several innovative products:  

Why Banks Can't Transform Legacy Applications - Part 2

In my everyday interactions with various types of service providers, systems from banks trump those from utilities, MNOs and retailers. They're far from perfect but their areas of improvement are unrelated to legacy backend. But, mine could be a one-off experience.

Can you list 3-4 specific features of immersiveness, realtime, uninterrupted, etc. that are demanded by customers but can't be fulfilled by banks due to their legacy baggage?

It'd be interesting to know if such verification will be used only for balance inquiries and the like or suffice even for fund transfer requests.

With your exposure to South India, you're probably aware of Abhinav Plantation, a now-defunct Chennai-based company that duped investors by offering interest rates that were 200 bps above bank FD rates by investing in eucalyptus tree plantations in the Tamilnadu and Kerala states of South India. In more recent times, many more "blade companies" have mushroomed, positioning emu farming and other ways to rapid riches. As the Bernie Madoff Ponzi Scheme would illustrate, such scams are not restricted to third world countries or to illiterate segments of the population.

I've always felt that people trust their money to such blade companies because of the latter’s promise of higher returns, not because they can’t find any formal financial service providers nearby. I was convinced about this when I saw 2 bank branches, 4 ATMs, 1 Western Union agent and 3 pawn brokers on the same street of a small town I visited in South India recently.

No matter how widespread it becomes, financial inclusion will never disintermediate loan sharks, check cashers and blade companies, which fulfill speed and greed, two basic human emotions that banks and other formal financial services providers won't or can't fulfill.

Centralizing KYC and making it available to individual companies (banks, insurance, MNOs, etc.) on the basis of usage is a clear example of how cloud offers compelling advantages over onpremise deployment. Centralized sanctions-screening is another - is there already an app for that?

"...merchants ban notes and coins for one day". One day - how lame is that? Private zones are far more promising for cashless to happen than high streets: A leading bank with its tech center located a few miles south of Manchester has been cashless - every day since 2007. On another note, will these merchants tell us how they found "the morning after the night before".

According to this brilliant FORBES article, many retailers themselves don't classify SKUs into the finegrained categories that PFMs require. That's the real reason for a PFM's inability to accurately classify shopping at a multibrand retailer and provide meaningful insights. Unless a mobile wallet uses a catalog and taxonomy that are granular enough for PFMs - and I don't know a single one that does - I don't see how it can solve this problem. This is why, when you get past the hype, PFM and targeted offers based on purchase history work in actual practice only in single brand retail where the merchant ID alone provides a reliable-enough indicator of the item and category. The information already received by banks for card transactions includes merchant ID even without mobile wallets.