Estonia: Instant Payments as the New Normal and the Work to Set a New Frontier for Digitalisation

At the Forefront of Digital Nations

Estonia is a small e-country in the euro area with a population of 1.3 million, where each resident has a digital identity and the tools to use it online. Practically all residents find it much easier to verify their identity and sign documents electronically than by giving handwritten “wet” signatures in person. Over the years the private and public sectors have developed many services and solutions that leverage the Estonian digital identity, and this has improved the user experience, digitalised business processes and increased efficiency in the financial sector and in payments. Eesti Pank, the national central bank, has supported this self-regulatory journey of the market in its catalyst and operator roles, with the aim of facilitating a smooth and efficient payment system in Estonia.

Estonia has achieved a lot by leveraging the best technologies and pushing the frontiers with new ones or building solutions that have had an impact well beyond its borders. That Estonian entrepreneurs have to date given the world five unicorn start-ups speaks for itself. This has been achieved through a combination of a pragmatic mindset and a connected digital environment that supports financial innovation by start-ups so that ideas can be made a reality.

Estonia opened its digital services and solutions to foreign businesspeople in 2014 through its e-Residency programme, allowing them to start and manage an EU-based company online. Today Estonia has over 70 000 e-residents from over 160 countries, running more than 13 000 digital companies.

High Levels of Digital Literacy

A high level of digital literacy allows better and faster digital services to be developed, and ultimately fully digital customer relationships to be established. In the early 90s, the financial sector was working together with the public sector to drive innovation. The entire financial and payments infrastructure was built from scratch, and because there were no legacy systems, only the latest technologies were used.

The banks acted like fintechs, advancing digital payment solutions and creating high expectations among users of payment services. We had online banking in 1996 and mobile banking in 2000, and we upgraded to eID/eSignatures in 2002 and smartphone banking apps in 2010. Payments became gradually faster until 2014, as they were settled ten times a day between banks, within 30-60 minutes during business hours, and immediately within banks.

The move towards digital customer relations was enabled by technology and state of the art solutions, but such a move cannot happen overnight. The banks in Estonia start teaching customers as young as six years old how to use digital payment solutions, as this is the age when they can open a bank account and start making card payments. This is then further supported by ...

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