What is South Africa's Payments Ecosystem Modernisation Programme (PEM)?

South Africa's National Payment System (NPS) is undergoing its most consequential structural overhaul in almost three decades. The South African Reserve Bank's (SARB) Payments Ecosystem Modernisation (PEM) Programme is not an incremental upgrade; it is a fundamental rebuilding of the rails that move money across the economy.

What is the PEM Programme and why does it exist?

Building on the SARB's Vision 2025 framework, the programme drives innovation, competition, efficiency, and financial inclusion. Junaid Dadan, President and Co-founder of Stitch, recently spoke at an event alongside the SARB to discuss the implications of the PEM programme. According to Dadan, this shift is fundamentally about removing structural barriers that have kept innovation bottlenecked.

"You want the people with the best product ideas who know the customers… to then have the freedom to go start the businesses they want to start, not the other way around," Dadan noted.

The programme's primary success metric is the widespread adoption and usage of fast, simple, affordable and secure digital payments across all segments of South African society. Three focus areas anchor the programme:

• upgrading the high-value Real-Time Gross Settlement (RTGS) infrastructure
• expanding faster payment systems like PayShap
• and introducing a reusable digital trust framework, PEMKey

Settlement is changing

The current RTGS system, known as the South African Multiple Option Settlement (SAMOS), has served South Africa's interbank settlement needs for decades. The Head of the National Payment System Department at the SARB describes the existing system as "functionally rich but technically [in need of] an upgrade."

The SARB is developing four core transactional systems as part of PEM:

• a new domestic RTGS system
• a regional RTGS system
• a fast payment system
• and an alternative payments messaging network.

A key driver for this investment is the recognition that PayShap, in its current form, has not yet achieved the scale needed to shift payment behaviour away from cash. Fragmented industry adoption — including inconsistent transaction limits, uneven proxy registration across banks and opaque pricing — has limited its reach.

The PEM Programme is designed to address these structural barriers head-on, with a team already working on PayShap priorities, including parity of enablement, fraud mitigation and use case expansion into corporate instant payments and person-to-merchant flows.

The new RTGS system will support multiple currencies, enable richer transaction data through ISO 20022 messaging, and open more direct connectivity pathways for financial institutions, including non-bank participants.

For enterprises, the direct implications are around settlement timing and finality. This will reduce counterparty risk and assist in opening the ecosystem to participation by non-bank entities.

For fintechs looking to participate in these new rails, the regulatory signal matters as much as the technical architecture. Dadan observes that this regulatory certainty can be a massive catalyst for growth. "The framework creates the ideal conditions for trust," he explains, "which actually makes the entire journey a bit easier because it provides certainty and clarity on where we need to go."

For enterprises managing high volumes, such as retailers and logistics operators, this shift to faster finality will require a thorough review of working capital calculations, reconciliation processes and treasury operations.

The shift to activity-based licensing

Perhaps the most significant change is the move to an activity-based regulatory model. Currently, participation requires that an entity holds a banking license or operates under bank sponsorship. PEM fundamentally expands that model, allowing non-bank entities to participate directly in specific payment activities.

The framework calibrates requirements by activity type and risk profile. For instance, a payments initiator will not face the same requirements as a settlement participant. This risk-proportionate approach is what makes the model viable for a broader range of entities.

To implement this, the SARB published two key 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. Both documents were initially published in November 2025 and are now working toward finalisation.

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.

Dadan highlighted how critical this is for the next generation of fintechs:

"You get rid of that kind of gatekeeping and... all business models need to be assessed by the banks before they can go into the market, and rather now they are assessed by the regulators. So for me, that's a huge shift, and I think that's why this is a good thing and why it will change the ecosystem."

By shifting "gatekeeping" from banks to the regulator, the SARB is ensuring that innovation isn't stifled by traditional banking risk appetites.

The COFI Bill: Market conduct reform

Alongside PEM is the Conduct of Financial Institutions (COFI) 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.

For Dadan, this type of regulation is what bridges the gap for the average consumer. He noted that even for himself, it was the SARB and conduct authorities' involvement in crypto regulation that provided a "level of comfort" because he knew there were finally guardrails in place.

For payments specifically, the implications are material. The finalised COFI Bill is expected to include provisions addressing payment system-related activities, open finance-related activities and crypto assets. This means the Bill will touch several of the areas where the PEM Programme is also driving change, including the licensing of new payment participants and the regulation of alternative payment methods.

Cabinet indicated that the COFI Bill is intended to support fair customer treatment, enhance transformation in the financial sector and promote stability, as well as support market development and competition, including by enabling a more differentiated approach to licensing that could facilitate the entry of new players such as financial technology firms.

For enterprises operating in financial services, retail, lending or insurance, the COFI Bill also has direct implications for how they manage customer relationships and product compliance. The Bill will require financial institutions to have policies in place to comply with the Financial Sector Code.

The COFI Bill does not yet have a confirmed tabling date, and it remains unclear to what extent the version tabled will differ from the 2022 public comment draft.

National Payments Utility

The establishment of a National Payments Utility (NPU), via the SARB's 50% acquisition of PayInc (formerly BankservAfrica), will provide open digital infrastructure to banks and fintechs alike. The SARB aims to transition PayInc into a centralised NPU that will provide open digital payments infrastructure to a broader range of participants, including non-bank financial services providers.

This is significant for enterprise businesses that currently depend on bilateral arrangements with individual banks or PSPs. Greater interoperability at the infrastructure level reduces dependency on single providers and creates more flexibility in how payment flows are routed and managed.

Introducing PEMKey

Meanwhile, the Digital Financial Identity (DFID) system — now operationalised through a capability the SARB calls PEMKey — moves well beyond traditional identity verification. PEMKey is a reusable, verifiable digital credential framework through which trusted authorities issue digital proofs, users hold their credentials in a wallet and relying parties can verify them on demand.

PEMKey enables a "trust once, reuse everywhere" model. Individuals and businesses obtain verifiable credentials (proof of identity, proof of bank account, tax credentials) from trusted issuers, store them in a digital wallet they control, and present them to verifiers with consent. The system is underpinned by a national trust framework with a trust registry governing which issuers, verifiers and wallet providers are permitted to operate within the ecosystem.

For enterprises carrying KYC obligations, this means a significant reduction in onboarding overhead, stronger fraud mitigation through biometric-linked credentials and a streamlined compliance model that replaces repeated document collection with instant, consent-based verification.

What enterprises should be building for now

The PEM Programme and the COFI Bill are multi-year efforts, but the infrastructure decisions enterprises make today will determine their future competitiveness.

• Avoid infrastructure lock-in: Don't build rigid dependencies on a single provider. Payment orchestration, which enables smart routing across multiple providers from a single integration, is already a sound operational strategy, and it becomes even more valuable as more participants enter the system.
• Invest in richer data: The new systems carry rich structured data. Invest now in reconciliation and reporting infrastructure capable of processing enriched transaction data. The enterprises that do will have a material advantage when the new rails go live.
• Understand PayShap's current limitations and trajectory: PayShap Request has launched, with QR+ enablement coming soon. Enterprises should plan for the PayShap of 2027, not the PayShap of today.
• Prepare for QR+ adoption: The SARB is rolling out a unified national QR code standard called QR+. This will replace the current fragmented landscape in which multiple QR standards create complexity for merchants and inconsistent usability for customers.
• Review settlement and reconciliation assumptions: The move toward prefunded settlement and reduced clearing windows will affect how enterprises manage intraday liquidity and reconcile accounts.
• Engage with licensing and conduct changes early: The activity-based licensing framework and the COFI Bill are both still being finalised, but enterprises operating at significant scale in retail, financial services or logistics should understand what participation categories will be available to them.
• Factor in fraud infrastructure: The SARB has introduced stringent safeguards covering system integrity, consumer protection and regulatory compliance to ensure expanded participation does not compromise the reliability of the financial system.
• Focus on the talent pipeline: Dadan urges enterprise leaders to look beyond just the tech. "We need to do more to build the pipeline of talent... if we don't invest in that pipeline, we actually are going to feel the pain five to ten years down the road."

The bottom line for enterprise leaders

As Dadan concludes: "It's about the collective boat moving forward." For enterprise leaders, a practical takeaway is this: the PEM Programme and the COFI Bill are redrawing the competitive map. The businesses that engage now — through their PSP relationships, their technology investments and their regulatory monitoring — will be positioned to capture the value that a more open, faster, better-governed payment system creates. Those that wait will be adapting on someone else's timeline.

FAQs

What is the Payments Ecosystem Modernisation (PEM) Programme?

The PEM Programme is the South African Reserve Bank's initiative to fundamentally rebuild the country's national payment infrastructure. Building on the SARB's Vision 2025 framework, it focuses on upgrading the Real-Time Gross Settlement system, expanding faster payment systems like PayShap, and introducing a reusable digital trust framework called PEMKey. Its primary success metric is the widespread adoption of fast, simple, affordable and secure digital payments across all segments of South African society.

Why is the SARB replacing the current SAMOS system?

The current South African Multiple Option Settlement (SAMOS) system has served the country's interbank settlement needs for decades, but requires a technical upgrade. The new RTGS system being developed under PEM will support multiple currencies, enable richer transaction data through ISO 20022 messaging, and open more direct connectivity pathways for financial institutions — including non-bank participants. This reduces counterparty risk and improves settlement timing and finality.

What is activity-based licensing and why does it matter?

Activity-based licensing is a new regulatory model that replaces the current requirement for entities to hold a banking licence or operate under bank sponsorship in order to participate in the payment system. Under the new framework, non-bank entities can participate directly in specific payment activities, with requirements calibrated by activity type and risk profile. This broadens the provider landscape, increases competition, and creates legal pathways for fintechs and large enterprises to participate more directly in acquiring or settlement.

What 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.

What is the COFI Bill and how does it relate to PEM?

The Conduct of Financial Institutions (COFI) Bill is a market conduct reform approved by Cabinet for submission to Parliament in April 2026. It establishes a single framework for market conduct covering open finance, crypto assets, and payment system-related activities — several of the same areas where PEM is driving change. The Bill forms part of South Africa's broader shift to the Twin Peaks model of financial regulation, which separates prudential supervision from market conduct oversight.

What is the National Payments Utility (NPU)?

The NPU is being established through the SARB's 50% acquisition of PayInc (formerly BankservAfrica). It will provide open digital payments infrastructure to a broader range of participants, including non-bank financial services providers. For enterprise businesses, this means greater interoperability at the infrastructure level, reduced dependency on single providers, and more flexibility in how payment flows are routed and managed.

What is QR+ and when is it coming?

QR+ is the SARB's unified national QR code standard designed to replace the current fragmented landscape where multiple QR standards create complexity for merchants and inconsistent usability for customers. QR+ enablement is coming soon as part of the PayShap roadmap, and enterprises should be planning for adoption now.

How should enterprise businesses prepare for PEM?

Enterprises should avoid infrastructure lock-in by adopting payment orchestration strategies, invest in reconciliation and reporting infrastructure capable of processing enriched ISO 20022 transaction data, plan for PayShap's 2027 capabilities rather than its current state, review settlement and reconciliation assumptions in light of prefunded settlement models, and engage early with the activity-based licensing framework and the COFI Bill while both are still being finalised.

What does PEM mean for PayShap?

PayShap is central to the PEM Programme's vision for faster payments in South Africa. In its current form, PayShap has not yet achieved the scale needed to shift payment behaviour away from cash — limited by fragmented adoption, inconsistent transaction limits, uneven proxy registration, and opaque pricing. The PEM team is actively working on parity of enablement, fraud mitigation, and expanding use cases into corporate instant payments and person-to-merchant flows, with PayShap Request already launched and QR+ enablement on the near-term roadmap.