The South African Reserve Bank’s Payments Ecosystem Modernisation Programme (PEM) 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.
Yet, for the mid-tier merchant, the independent restaurant, boutique retailer or owner-operated franchise, the experience of navigating payments has become more complicated. More devices, more lock-in and more friction. Which is saying something about how payments have evolved back into complexity and competition, rather than outwards into shared value and growth.
Traditionally, when a small merchant wanted a card machine, they would have to apply through their bank and undergo a full Know Your Customer (KYC), credit checks and risk assessment that would take weeks. Only after passing stringent checks and a lengthy wait would a merchant receive a Point of Sale (POS) device that they could then use to manage sales and customers. Theoretically, when fintech-led models emerged onto the market merchants could buy POS devices off the shelf and simply sign up and start using them. The onboarding process was self-service and remote, easily completed in a matter of minutes or days.
The problem is that the market became too crowded and the different players all solved their own problems, not those inherent within the ecosystem. Banks were losing merchant revenue to fintechs so they built direct-to-merchant products. Fintechs then saturated the small business market and, as they aimed their trajectory upwards into larger enterprises, they built their own POS systems. POS vendors had to replace the payment providers that were poaching their merchants so they chased multiple integrations simultaneously. And the regulators then opened the rails to more participants, which was smart and added more choice, but also more fragmentation.
Considering that the South African SME contributes approximately 40% to the gross domestic product it’s understandable why this market is being targeted by every bank, fintech and POS vendor. However, while every move made by the market has been rational and smart, the collective outcome has become chaotic for the merchant in the middle. Fragmented payment systems complicate integration for businesses trying to offer seamless payment experiences and switching banks means changing terminals, renegotiating integrations and disrupting operations. A merchant who wants to move from one acquiring bank to another effectively faces a hardware replacement project. Bank agnosticism remains largely aspirational for companies below the top tier, even though it’s a reasonable expectation that your payment infrastructure serves your business rather than a retention strategy.
There is also a deeper structural problem. Banks have partnered with or acquired companies with POS capabilities while fintechs have crept into the POS vendor space and nobody has architected the mid-tier merchant ecosystem. So, the real question right now is…how can the payments ecosystem be architected to improve the relationship between POS and the merchant?
It starts with open rails and a trusted commercial layer that sits between banks and POS vendors, connecting them to one another and taking accountability for making the relationship work. That layer doesn’t currently exist at scale as there isn’t an organising entity that all three parties – POS vendor, bank and merchant – can trust. One that has the technical certifications required across multiple banks, the ability to manage regulatory compliance and deliver the commercial infrastructure for the POS vendor to become a genuine payment provider under its own brand.
A third-party technology provider with certified relationships across multiple acquiring banks can act as the connective tissue between banks and POS vendors. The POS vendor signs a back-to-back agreement with the bank, gains a direct commercial relationship, and then offers merchants a fully integrated payment solution under its own brand. The bank gains a portfolio of vetted, technically capable distribution partners that it could never recruit or service at scale on its own. The merchant gains a single trusted point of contact for both software and payments, with the ability to switch acquiring banks without replacing hardware or renegotiating integrations.
This is what a genuine relationship architecture looks like in practice, and the merchant stops being the subject of competing retention strategies and becomes instead served by a system that’s designed around their needs. The SARB PEM programme will deliver the infrastructure conditions for this to scale – open rails, non-bank participation and interoperability create the environment, but the relationship architecture comes down to commercial trust, regulatory certifications and capabilities that sit on top of the technology stack.
South Africa’s mid-tier merchant market is large, underserved and structurally ready for this model. Change means closing the structural gap with approaches that reduce complexity and improve access for all stakeholders.
