By Modest Ipangelwa
Namibia’s financial system is entering a new era. With the introduction of the Payment System Management Act, 2023, and the Bank of Namibia’s updated rules for e-money issuance under PSD-3 (effective 27 March 2025), the country is laying the groundwork for a more inclusive, digital-first economy. At the center of this change lies a critical question: what is the difference between e-money and bank deposits, and why does it matter for Namibia’s financial future?
Traditionally, bank deposits have been the cornerstone of trust in the financial system. When individuals or businesses deposit money into a bank, it becomes a liability of the institution. These funds are used to create credit, fund lending, and fuel economic growth. They are closely regulated to ensure stability, with strict rules on capital adequacy, liquidity, and, eventually, deposit protection. But while deposits offer safety and opportunities for wealth creation, they have also been limited in reach. Opening and maintaining a formal bank account is still a hurdle for many Namibians, particularly in rural areas and among informal businesses.
E-money introduces a new dimension. Unlike deposits, e-money represents a digital claim against the issuer and exists only in electronic form, usually within a mobile wallet. Importantly, it is not a bank deposit unless issued by a licensed bank. This distinction matters: e-money cannot be lent out or intermediated; instead, the value must be safeguarded in trust or settlement accounts. The strength of e-money lies in accessibility. Licensed wallet providers whether banks, fintechs, or mobile operators can issue e-money and distribute it through mobile platforms and agent networks, bringing financial services directly to communities where traditional banking struggles to reach.
The regulatory framework now in place ensures this innovation is built on a solid foundation. Under PSD-3, the Bank of Namibia has set out clear licensing guidance for payment service providers, along with strict requirements for safeguarding customer funds, anti-money laundering compliance, and consumer protection. Perhaps the most significant development is that e-money providers will be able to connect directly to the Instant Payment Platform (IPP). This opens the door to interoperability; wallets and bank accounts will speak the same language, enabling seamless transfers across the financial system. It also encourages healthy competition at the edge, where service providers innovate to meet the everyday needs of consumers.
The impact on Namibia’s financial system will be profound. Banks will continue to play their traditional role, managing deposits and providing lending, savings, and credit. But e-money providers will complement them by offering fast, accessible, and low-cost digital payments to populations historically excluded from the system. Together, they will create a two-tiered structure of value: deposits anchoring stability and growth, while e-money drives inclusion and convenience.
For Namibia, where financial exclusion remains a pressing challenge, this balance offers a clear path forward. Rural households and informal traders will no longer need a bank account to participate in the digital economy. The cost of transactions will fall as wallet providers and banks compete for users. Financial literacy will grow as people interact more frequently with digital platforms. And the system itself will become more resilient, with multiple players innovating under the same regulatory umbrella.
Ultimately, the difference between e-money and deposits is not just technical, it is transformative. By clarifying the rules and enabling both banks and non-banks to issue e-money under a common framework, Namibia has created space for innovation without compromising trust. The combination of bank intermediation and wallet accessibility could finally unlock the long-promised goal of universal financial inclusion, reshaping the country’s financial landscape for decades to come.