Banking for e-residents: Your key questions answered

There have been recent updates to the way e-residents can open an Estonian business bank account so the programme is issuing new advice and revealing some of the criteria that can affect the likelihood of an application being accepted or rejected.

Estonian bank LHV

The latest advice for accessing EU business banking as an e-resident is available here: https://medium.com/e-residency-blog/heres-how-you-can-create-an-eu-company-with-eu-banking-anywhere-on-earth-cbba47386489.


E-Residency has been described as the world’s first government startup because the Republic of Estonia is offering a unique value proposition to customers around the world.

The product — a secure online gateway to the EU business environment — is in its public beta phase of development.

For those not familiar with startup jargon, the beta phase enables products or services to be tested by releasing them to real customers in the real world so that improvements can continuously be made. Public beta (also known as an open beta) means that opportunity is available to everyone.

It’s not just the programme and other public institutions making those improvements however, as the private sector is performing a vital role in enhancing the value of e-Residency.

E-Residency is already delivering real value, which you can read more about on the e-Residency blog, but one of the areas undergoing significant improvement in 2017 is access to e-banking and other financial services.

E-Residency alone does not guarantee a business bank account, but it is a key priority of the programme to ensure e-residents can access all the financial tools they need to successfully run a location-independent business.

What’s the current situation regarding Estonian banking and e-Residency?

The government-backed digital identity provided by e-Residency makes it easier than ever to manage secure e-banking services, which can be integrated with other e-commerce solutions such as PayPal.

Not all e-residents require an Estonian business bank account, but the feedback from those that have already acquired one has been very positive. The two most popular banks for e-residents are LHV Pank and Swedbank.

LHV is an Estonian banking and financial services company headquartered in Tallinn, while Swedbank is a Nordic-Baltic banking group based in Stockholm, Sweden with a significant presence in Estonia.

E-residents report that they can easily and securely manage their accounts with either bank by logging in with their ID card and card reader from anywhere in the world. The interfaces are easy to navigate, all communication is in English (and various other languages) and their accounts integrate with other international payment providers and e-commerce solutions that they need to run their business.

In particular, entrepreneurs from developing markets often have difficulty accessing international payment providers and that can hold back their entrepreneurial potential. The access to e-banking and e-commerce provided by e-Residency of Estonia has entirely transformed their ability to conduct business with customers and suppliers around the world.

The reason a business bank account is not automatically included within the e-Residency package though is because the decision to extend or deny banking services to anyone, whether e-resident or not, is made at the sole discretion of the banks themselves.

The banks have the right to set their own requirements, as well as ask for additional information and documents before providing a business bank account.

However, the programme is always keen to work closely with partners in the private sector who can enhance the value of e-Residency.

One way this is being done is to ensure Estonian business bank accounts can be opened from abroad. This would enable e-residents to complete the entire process of becoming an e-resident, registering an Estonian business and opening an Estonian business bank account without ever having to visit Estonia.

In support of this, the Parliament of Estonia has approved legislation that allows Estonian bank accounts to be opened remotely. However, the fact that this is legally possible does not necessarily mean that it is practically possible straight away so a lot of work is still taking place to enable this significant change.

In addition, this increased demand has led to updated processes and guidelines among the e-Residency programme’s banking partners for how they handle applications from non-residents who wish to open business bank accounts in Estonia.

It’s understandable that these would not ordinarily be published publically as no one can guarantee the outcome of an application. However, they have agreed to share some of these new criteria to help both e-residents and other private sector partners better understand the situation.

This was presented for the first time at the recent E-Residency Service Providers Round Table and is now discussed below along with new advice from the e-Residency programme for e-Residents who wish to open an Estonian business bank account.

“It’s important to recognise that e-Residency is an entirely new concept for everyone,” says Kaspar Korjus, Managing Director of e-Residency. “Both public and private institutions need time to adapt, whether that means ensuring existing services meet the needs of e-residents or creating entirely new services around e-Residency.

“Fortunately, the programme has a clear direction and is already delivering significant value to both Estonia and e-residents around the world. That means the private sector can invest with confidence and know that the programme is here to work alongside them to achieve our shared objective of helping unleash the world’s entrepreneurial potential.”

How can e-residents currently open an Estonian business bank account?

At present, it’s still necessary to travel to Estonia in order to apply in person for an Estonian business bank account. That’s not ideal, yet a large number of e-residents do believe the journey is worth it. Some combine their business trip with a short holiday, while others visit the country for just a few hours.

Crucially, no one wants e-residents to be rejected after taking the time and expense to travel so the e-Residency programme currently recommends speaking to a business service provider before booking any travel to Estonia for the purpose of opening a business bank account.

Some of the most well-established business service providers for e-residents include LeapIN, 1Office and Incorporate.ee.

They can advise e-residents of the right banking services to meet the needs of their company and also provide additional business services that might be important for the application, including a legal address, virtual office, accountancy and compliance.

The banks each have their own criteria for deciding which businesses are likely to have their applications for an account approved or rejected, but these criteria generally favour companies that have clear business goals and are perceived as trustworthy, particularly by demonstrating their commitment to compliance and accountancy.

Crucially, there should be a clear need for an Estonian business bank account so companies that do cross-border business with services accessible to Estonians will be viewed far more favourably than companies that only conduct business outside of the EU.

Banking processes are constantly being updated and no one is able to guarantee the outcome of an application, but these are the types of companies that are likely to be viewed most favourably by Estonian banks at present:

  • Small and medium companies providing services or products
  • Companies with clear business goals and action points
  • Companies doing business in the EU
  • Companies doing cross-border business with services accessible to Estonians
  • Companies with owners in countries where Estonia has embassies
  • Companies directly owned by e-residents as private persons
  • Companies that are trustworthy, compliant and keep their accountancy books in order

At the same time, these factors are viewed less favourably at present:

  • Large companies and those involved in manufacturing or wholesaling
  • Companies that act as intermediaries to sell the services of others
  • Companies only doing business in their home country or outside of the EU
  • Companies without clear business goals

This is why it is important for entrepreneurs to always fully explain their business and reasons for incorporating in Estonia when prompted during the process of applying for e-Residency, registering a business and applying for a bank account. Minimal bureaucracy is a key advantage of e-Residency, but that means that any information that is requested will be very important.

The best way e-residents can ensure their business is fully understood is to prepare their business plan ahead of time as the banks take these very seriously. If you can demonstrate strong ties to Estonia through existing sales or relationships with partners, employees or suppliers then it’s very useful to highlight that in the business plan.

How else will access to e-banking change in 2017?

The ability to open an Estonian business bank account remotely is already being tested by Swedbank with a small number of clients. They are currently examining how video interviews can replace the process of having to physically walk into a bank before this can be made more widely available to potential clients around the world.

In addition to this progress being made by the banking industry in Estonia, there are also e-banking solutions being worked on by several global fintech companies. This has the potential to radically transform the ease of e-banking across borders for almost everyone on Earth and complement the use of e-Residency.

This will likely be available after the first half of 2017 so the programme is already working closely with the fintech companies pioneering this change in order to integrate it with e-Residency from the start.

This would provide e-residents with new e-commerce solutions, as well as new options for traditional IBAN business accounts. These would not necessarily be based in Estonia, but would provide similar e-banking benefits that entrepreneurs need to conduct business around the world with greater ease.

An Estonian business bank account may be more convenient in many circumstances, but the main priority for most entrepreneurs is the ability to easily conduct online transfers and use company credit cards. Even at present, not every e-resident who registers a business in Estonia chooses an Estonian business bank account too.

“It’s really exciting to see how e-residents are already using our product to run successful location-independent companies online, but the team is working hard in close co-operation with the private sector to integrate new solutions that will benefit them and future e-residents,” adds Kaspar Korjus.

“The vision for the e-Residency programme is the empowerment of global citizens who want to do business around the world. Fortunately, much of the financial services industry shares this vision so we are looking forward to unveiling new partnerships that will further enhance the value of e-Residency.”

Read more about how e-residents around the world are already benefiting in the e-Residency blog.