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A Reform Decades in the Making
South Africa’s financial system has long been one of the most sophisticated on the African continent. Its banking infrastructure, capital markets, and payment networks are mature by emerging market standards. But maturity, left unattended, becomes rigidity. And in a world where real-time payments, digital identity, and open financial systems are no longer aspirations but expectations, South Africa’s payment infrastructure had begun to show its age.
The South African Reserve Bank (SARB) recognised this. In 2018, it published Vision 2025, a strategic framework setting out nine goals to improve the country’s payment system in alignment with the National Development Plan 2030. That vision planted the seed. What has followed is the most significant structural reform of South Africa’s financial infrastructure in nearly three decades: the Payments Ecosystem Modernisation Programme, known simply as PEM.
This is not a pilot. It is not a committee recommendation. It is, as the SARB’s own annual report describes it, “the most significant strategic intervention in the payments ecosystem since the introduction of the SAMOS system and the enactment of the National Payments System Act nearly 30 years ago.” And for every fintech, bank, payment service provider, and digital economy builder operating in Africa, it signals a turning point worth understanding in detail.
What the PEM Programme Actually Is
The Payments Ecosystem Modernisation Programme is the SARB’s flagship initiative to drive transformation in South Africa’s financial system, aiming to enable fast, simple, inclusive and secure digital payments across the country.
But describing it simply as a payments upgrade would be an understatement. PEM is a multi-layered infrastructure overhaul structured around three foundational components: digital identity, digital payments, and data-sharing infrastructure. Each component addresses a different layer of the problem, and together they are designed to rebuild the payment system from the ground up.
The PEM Programme is structured around seven key initiatives, supported by three foundational components: digital identity including e-signatures and Know Your Customer capabilities, digital payments building on and enhancing PayShap, South Africa’s domestic fast payment system, and data-sharing infrastructure. The SARB’s stated objective is the widespread adoption of fast, simple, affordable and secure digital payments. The potential prize is a boost to South Africa’s GDP by 0.5% from digital payments.
That GDP figure deserves a moment of reflection. A 0.5% boost to GDP from digital payments alone, in an economy the size of South Africa’s, represents billions of rands in additional economic activity. It is the kind of number that illustrates why payments infrastructure is not a technocratic back-office concern. It is economic policy.
The Problem PEM Is Solving
To understand why PEM matters, it is necessary to understand the gap it is closing.
According to the South African Reserve Bank’s 2023 Payments Study Report, 67% of the population has issues adopting electronic and digital payment methods. In addition, a third of the population is excluded from digital transformation due to a lack of infrastructure, poor internet connectivity, limited merchant support and high service costs.
South Africa, for all its financial sophistication, remains an overwhelmingly cash-reliant economy. The SARB’s own assessment found that the existing payment system was neither inclusive nor accessible to all. The concentration of payment infrastructure in the hands of a small number of large incumbent banks created structural barriers for fintechs, non-bank providers, and ultimately for the millions of South Africans trying to participate in the digital economy.
The PEM Programme is reconfiguring the country’s entire clearing and settlement architecture, with new payment institution licences expected in early 2026. The goal is to deliver fast, simple, inclusive and secure digital payments that replace and upgrade both high-value and low-value retail payment rails. This reconfiguring and reimagining of the payments ecosystem is an attempt at reducing the concentration risk, stimulating more competition and extending financial services to underserved communities. And it is the largest infrastructure reform SARB has launched in decades.
The Five Pillars of the Transformation
1. Upgrading the Core Settlement Infrastructure
The PEM programme is upgrading the high-value Real-Time Gross Settlement system, which underpins the country’s financial transactions and processes the equivalent of South Africa’s GDP every 12 days. The programme is also expanding and modernising faster payment systems, including real-time clearing and PayShap, to ensure they serve a broader market.
The SAMOS and SADC-RTGS systems, which currently underpin high-value settlements across the country and the Southern African Development Community region, are being enhanced to maintain stability during the transition while new and improved systems are built in parallel.
2. The National Payment Utility
A key component of the SARB’s strategy is the establishment of a National Payment Utility which will provide the necessary middle-mile infrastructure needed to promote innovation and prevent fragmentation within the financial system. Led by the SARB, the National Payment Utility will oversee the operation of a fast payment system that functions much like cash, providing instant, free and easy-to-use transactions with clear confirmation of payment.
The National Payment Utility concept draws inspiration from fast payment systems implemented in Brazil and India. Brazil’s PIX and India’s UPI have become reference models for what happens when a central bank removes the barriers between payment infrastructure and the market. Transaction volumes explode, costs collapse, and financial inclusion accelerates. South Africa is building its own version of this model, with the National Payment Utility as its operational backbone.
3. PEMKey: The Digital Trust Layer
One of the most consequential and least discussed elements of PEM is PEMKey.
PEMKey is the SARB’s reusable, verifiable digital credential framework. It enables a “trust once, reuse everywhere” model where individuals and businesses obtain verifiable credentials such as proof of identity, proof of bank account, and tax credentials from trusted issuers, store them in a digital wallet they control, and present them to verifiers with consent. For enterprises carrying KYC obligations, this means reduced onboarding overhead, stronger fraud mitigation, and streamlined compliance.
The SARB hosted the first Payments Ecosystem Modernisation Industry dialogue for 2026 on 9 and 10 April 2026, where the payment industry was updated on regulatory reform progress, the development of the QR+ standard, and given a demonstration of PEMKey, which will enable interoperable, trusted financial credentials for digital payments.
The implications of PEMKey for the fintech sector are significant. Every fintech that has wrestled with the cost and friction of repeated KYC verification across multiple products and institutions understands the problem PEMKey is designed to solve. A reusable, portable, consent-driven digital credential is not just a convenience feature. It is the foundation for a genuinely interoperable financial ecosystem.
4. Opening the National Payment System to Non-Banks
Perhaps the single most consequential structural change within PEM is the opening of the National Payment System to non-bank participants.
In July 2025, National Treasury published its position paper on the PEM Programme, affirming the policy goals set out in the National Payment System Framework and Strategy Vision 2025. To support the regulatory amendments required to implement the PEM Programme, the SARB published two draft documents for public comment: the Draft Specific Payment Activities Exemption Notice and the Directive in respect of specific payment activities within the national payment system.
For enterprise businesses, this matters in two ways. First, it broadens the provider landscape. More participants with direct infrastructure access means more competition on pricing, capability and service quality. Second, for large enterprises with the scale and appetite to explore more direct participation including in acquiring or settlement, the legal pathway now exists where it did not before.
Previously, access to South Africa’s payment rails was gated through the banking system. A fintech that wanted to offer payment services had to route through a bank sponsor, giving incumbent banks structural veto power over which business models could access the market. The regulatory reform removes this gatekeeping and replaces it with a licensing framework administered by the SARB directly.
5. PayShap and the Fast Payments Expansion
PayShap, active since 2023, allows money to be transferred in seconds using a ShapID. In its first year, it processed more than one hundred million transactions and increased the per-transaction limit to R50,000. Opening the National Payment System will allow PayShap to be integrated into third-party wallets and apps, accelerating adoption and reducing reliance on cash.
PayShap’s first-year performance, over one hundred million transactions, demonstrates that the demand for instant, accessible payments exists. The challenge has been supply-side: too few participants, too many barriers, and too little integration with the non-bank apps where millions of South Africans already spend their digital lives. PEM addresses this directly by making PayShap accessible to a much broader ecosystem of service providers.
The Regulatory Architecture Supporting PEM
PEM does not operate in isolation. It is part of a broader regulatory modernisation that is reshaping South Africa’s financial governance framework.
Alongside PEM is the Conduct of Financial Institutions Bill, approved by Cabinet for submission to Parliament in April 2026. It establishes a single framework for market conduct, addressing everything from open finance to crypto assets, forming part of government’s broader shift to the Twin Peaks model of financial regulation, which separates prudential supervision from market conduct oversight.
In February 2026, the SARB published a consultation paper on Vision 2030+, the next iteration of its medium to long-term payment strategy. The paper invites stakeholder input on strategic goals and ecosystem trends that should shape the future of the National Payment System.
This layered regulatory architecture, PEM for infrastructure, the Conduct of Financial Institutions Bill for market conduct, and Vision 2030+ for strategic direction, signals that South Africa’s financial modernisation is not a single event. It is a sustained, coordinated programme of reform with a decade-long horizon.
What This Means for Africa’s Fintech Ecosystem
The significance of PEM extends well beyond South Africa’s borders.
A Blueprint for the Continent
South Africa is, in many respects, running an experiment that the rest of Africa is watching. The country has the institutional capacity, regulatory sophistication, and financial market depth to attempt a payment system transformation of this scale. If PEM delivers, it becomes the reference architecture for how other African central banks approach similar reforms. Nigeria is building on its BVN infrastructure. Kenya has its M-PESA ecosystem and the Kenya Fast Payment System. Ghana has its GhIPSS instant pay system. But none of these has yet attempted the kind of full-stack, multi-layer reform that PEM represents.
The Identity Infrastructure Prize
The introduction of PEMKey as a universal, reusable digital financial credential is potentially the most transformative element of PEM for the broader continent. The single most persistent barrier to financial inclusion across Africa is not the absence of digital infrastructure. It is the absence of trusted, portable digital identity. People who cannot prove who they are cannot open accounts, access credit, receive remittances, or participate in formal economic life. PEMKey is South Africa’s attempt to solve this problem at scale, and the model it establishes could become the template for digital identity frameworks across the continent.
The Non-Bank Access Precedent
By extending access to fintechs, SARB is not just opening new doors. It is redefining the financial playing field, promoting competition, innovation, and financial inclusion, especially for underserved and unbanked communities.
When a G20 central bank removes the requirement for non-bank payment providers to channel through incumbent banks, it sets a precedent that other regulators across Africa can point to when making similar arguments domestically. The structural reform of who can access payment rails, and on what terms, is the single most consequential policy lever for fintech competitiveness. South Africa’s move in this direction strengthens the hand of fintech advocates in every other African market.
Cross-Border Implications
Opening the National Payment System will allow fintechs to integrate into regional projects such as the SADC TCIB scheme, which offers real-time multi-currency transfers. With common standards such as ISO 20022, remittances will become cheaper and cross-border e-commerce more seamless.
For a continent where remittances represent a significant share of GDP in many countries, and where cross-border payment costs remain among the highest in the world, the standardisation and interoperability that PEM promotes has direct implications for regional financial integration. The African Continental Free Trade Area agreement envisions a deeply integrated African economy. Payment infrastructure that cannot move money cheaply and quickly across borders is a structural obstacle to that vision. PEM, by building on ISO 20022 standards and connecting to regional settlement schemes, contributes directly to dismantling that obstacle.
What Fintechs Must Do Now
For fintechs operating in South Africa or planning to enter the market, the PEM Programme creates both obligation and opportunity.
Engage the Licensing Process. The opening of the National Payment System to non-bank providers is a structural opportunity that requires active engagement. Understanding the new licensing categories under the Draft Specific Payment Activities Exemption Notice and the Draft Directive is not optional preparation. It is the gateway to direct market access.
Build for PEMKey Integration. As PEMKey moves from demonstration to live deployment, fintechs that build their onboarding and identity verification infrastructure around the reusable credential model will gain significant competitive advantages: lower KYC costs, faster customer onboarding, and stronger fraud mitigation.
Design for Interoperability. The National Payment Utility will become the shared infrastructure layer through which all participants access the fast payment system. Products designed around proprietary payment flows that cannot interoperate with NPU rails will find themselves structurally disadvantaged. Designing for interoperability from the start, not as an afterthought, is the correct product strategy.
Participate in the Policy Process. The SARB’s Vision 2030+ consultation process is still open. Fintechs that engage with the policy development process, that submit comments on draft regulations, that participate in industry dialogues, shape the rules of the game. Those that wait for the rules to be finalised before engaging will have missed the opportunity to influence them.
A Moment of Genuine Transformation
It would be easy to approach a central bank reform programme with scepticism. Regulatory announcements frequently exceed implementation. Deadlines slip. Vested interests resist. The gap between policy ambition and operational reality in financial regulation can be vast.
But PEM is different in one important respect: it has been in motion for years, with measurable milestones, public consultations, industry dialogues, and live demonstrations. PEMKey was demonstrated to the industry in April 2026. PayShap is already processing tens of millions of transactions. The licensing framework for non-bank payment providers is in public comment and moving toward finalisation. This is not a vision document. It is a reform programme in execution.
South Africa’s payment ecosystem is at an inflection point. The SARB has signalled its intention to take a more active role in driving digital payment adoption, opening access to non-bank players while raising the bar for authorisation, governance and oversight. For payment service providers, the message is clear: the opportunity has never been greater, but neither have the compliance expectations.
For Africa’s broader fintech ecosystem, the message is equally clear. The continent’s payment infrastructure is being rebuilt, one country at a time, by central banks that are learning from each other and from the global playbook of fast payment system design. South Africa’s PEM Programme is the most ambitious and most comprehensively resourced of these efforts. What it achieves over the next three to five years will shape the expectations of regulators, investors, and builders across the continent.
The question for every fintech on the continent is not whether to pay attention to PEM. The question is whether to engage early enough to shape it and benefit from it, or late enough to simply react to it.
The choice is still open. But not for much longer.
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