Yes. You have to use PNG or JPG files and name them with the WordPress locale. For example, en_US.png.
Upload these files in the /wp-content/polylang/ directory.
Note: You have to create the directory yourself. Don’t use the /polylang/flags/ directory as your files would be removed when automatically updating the plugin.
Once the custom flags are uploaded, go to Languages > Settings. Click on the “URL modifications” settings and then on Save Changes.
Note: your custom flags won’t be used on admin side.