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A Guide to Unlimited Banking for E-Residents in Estonia
For detailed information +90 542 381 3868 'Call.
Estonia is the world's first e-state and offers e-residency to people from all over the world. Some of the recipients of Estonian e-residency are Angela Merkel and Barack Obama. This country has declared internet access a human right, has a thriving IT startup culture, and has digitally facilitated an unprecedented number of public services for citizens and businesses.
From voting to signing documents and paying taxes online, Estonia applies a seamless and modern approach to getting errands done. Providing digital services means less bureaucracy while ensuring more transparency and efficiency in some vital sectors like health and education. Residents can do almost anything they need online, such as paying their taxes, getting medical prescriptions, and even registering a business.
Estonian e-residency has shaken up the way the world does business, enabling location-independent entrepreneurs to offer products and services in countries where they do not reside, thanks to Estonia's unique digital infrastructure.
However, most commercial activities involve money, which requires banking services. It has always been a fact of life that technology changes faster than legal regulation, and international financial institutions are a good example - banking, based on old local systems and countless currencies, is unevenly distributed in many ways around the world. So what does this mean for e-residents who need to transact with customers in different markets and currencies?
Today, there are a variety of possibilities for new e-resident businesses to consider, from simple payment gateways to full clearing bank solutions. Which one you choose depends on what your unique e-business needs.
Many entrepreneurs prefer Estonian e-resident status precisely because of its international outlook and digital infrastructure that allows for trade with customers all over the world. The e-Residency program was created to support this and to ensure that e-residents have the tools and channels they need to work in a completely location-independent manner.
Cross-border banking with an Estonian clearing bank is a great solution for entrepreneurs who want to operate in different currencies and jurisdictions, and its benefits include:
However, commercial banks in Estonia are independent of the state and have their own criteria for choosing whom to take on as a customer. They are also subject to binding EU-wide regulations such as 'know your customer' (KYC) and 'Anti-Money Laundering' (AML) compliance procedures, which are required by law to reduce the risk of banks and financial services companies being used as vehicles for financial crimes.
This has led to some difficulties for e-residents in the past, as the AML culture in international banking can lead to automatic suspicions regarding the way non-residents try to open a local account. With the responsibility of determining beyond a reasonable doubt that all funds held by the institution are completely "clean" and original, some prefer not to do business with non-Estonian customers at all — international banking is largely based on trust between correspondents. Institutions operating under different legal frameworks in different countries and ultimately they make their own decisions regarding customer selection. Therefore, Estonian banks that will offer services to international residents request a face-to-face meeting for KYC purposes before deciding whether an account can be opened.
Also, like banks all over the world, there are fees to be paid - to open the account in the first place, and then small regular fees for account maintenance and card provision (for example, €2 per month for an LHV Business Debit Mastercard).
LHV is the most commonly used bank for e-residents in Estonia, as they have always been open to serving single-shareholder companies with easily traceable income. Recently, Coop Pank has also joined the e-Residency marketplace of service providers, so there are alternative options to consider as well as a growing number of alternatives.
If borderless banking in Estonia is not for you, it is worth considering an account in a different EEA country, perhaps where you are fiscally resident.
In 2019, Estonia amended its commercial code to allow entrepreneurs to register a capital contribution with an account at an EEA credit or payment institution. So, if you already have a business relationship with a local bank, you can discuss the possibilities of accepting your new Estonian business as a customer.
This would allow you to access credit limits and other business banking advantages without having to travel to Estonia for KYC. However, it is clear that you would not be able to use your Estonian e-residency digital ID to manage business banking transactions, and your IBAN would be from a different jurisdiction (which could lead to confusion and even IBAN discrimination).
Meanwhile, there are other benefits to being part of Estonia's innovation culture, and one of them is the existence of alternative solutions for commercial transactions.
Ten or twenty years ago, it would have been unthinkable to run an international business without the support of a traditional bank. However, today, there are other options, at least for Estonian e-residents who are personally resident in the UK or the EU.
The fintech Wise, formerly known as TransferWise, was an Estonian startup created to provide low-cost peer-to-peer currency conversions. Today, Wise Payments Limited is authorized as an Electronic Money Institution (EMI) by the UK Financial Conduct Authority (FCA) and has evolved into a highly functional non-bank payment provider.
This means your Wise account is an electronic money account rather than a bank account, so it does not offer the savings and lending services of a bank and is not covered by the deposit guarantee scheme. Wise protects customer assets in international clearing banks around the world (including LHV Pank in Estonia). With Wise, you cannot earn interest, get a loan, or open an overdraft account.
So, Wise is not a place to accumulate capital, and indeed they recently introduced a fee for holding deposits of more than €3000 in personal accounts (because interbank € interest rates saw negative territory this year). This caused outrage in many digital nomad forums; a fact that can be seen in many ways as a testament to the user experience of Wise, showing that many simply saw it as their go-to cross-border application for daily banking.
For business, the biggest advantage of Wise is that it supports up to 10 sets of local bank details; which allows for the acceptance of payments 'like a local' from your customers around the world at the real exchange rate (in more than 50 currencies) for a low flat fee instead of commission or rate arbitrage.) This represents huge savings for e-resident entrepreneurs who receive payments in different currencies and helps them get paid directly and easily in the first place - often strikingly fast thanks to the UK's Faster Payment Service (FPS). However, it is important to realize that these local bank details (like 8-digit account numbers + sort codes for UK customers, or ACH details for the US) are virtual, not real.
There are other fintech solutions to explore, including Revolut Business, Monzo, and Starling. These are all EMIs rather than banks, but they include a range of services that are extremely useful for business transactions, such as payroll support and integrated accounting software, as well as currency exchange.
They all charge in different ways and offer different user experiences (including mobile apps that are usually better designed than those of traditional banks, being natively digital services).
If you are accepting payments for online sales and services, there are also payment gateways to consider for many online business owners. These include transfers from portals like PayPal, Stripe, and Amazon.
These are not alternatives to banks, but a seamless integration with your business banking is very important, and sometimes there can be unexpected limitations. For example, PayPal currently only accepts Revolut Business accounts from the following countries: United Kingdom, Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain. Therefore, Danish or Hungarian e-Residents might find themselves unable to move money to meet a payment need…
Other payment gateways include Payoneer, Paysera, and your fellow Estonian e-citizens Payhawk, as well as Wamo, Intergiro, and Juni; your immediate needs for services as well as the way you aim to grow your business.
Get Information on Bank Accounts and Company Formation in Estonia
How do you decide which is right for your Estonian e-residency business? This detailed comparison of Wise and LHV services can help you choose between the two, but it can also help you explore how they might work best together to meet your cross-border banking requirements:
You will need to carefully compare the different services and discover the best way to provide an overview of your business's complete financial picture - this is where integrations come in.
You will also need to consider speed and costs. Fintech accounts can be set up extremely quickly and do not require a face-to-face KYC meeting, so you can get up and running (and raise your first invoice) as soon as possible. Many entrepreneurs find it useful to evaluate opening a full-featured business bank account from a workflow perspective, the same way they might evaluate the technology they use to innovate or collaborate. The ideal solution might include a combination of integrated services, such as: Stripe for online content sales, linked to the main business bank account and reconciled monthly, while Wise is used for non-Euro billing and receipts.
Additionally, you may decide that your business plan includes creating a Wise account and PayPal ASAP to support the immediate transaction needs of your business plan, while planning to visit Estonia and open an account at LHV or another local bank when time and resources permit.
Supported by local integrations and application programming interfaces (APIs) that you don't need to think about thanks to automation - but from time to time you may need to authorize or re-authorize it to access information and display it for you.
It includes pre-filled application forms and pre-acceptance for a business bank account before you book your flight to Estonia (or even send your personal documents). You still need to attend this meeting in person, but you can do it with confidence and in a way that suits you - perhaps taking the time to explore beautiful Tallinn and meet with other like-minded business owners and entrepreneurs.
Once your LHV account is opened, the LHV native API means that all payments are reconciled in real-time, so your dashboard shows an accurate snapshot of your cash position in all currencies. They CANNOT make payments as this remains under your personal control through your eID access codes - but they can ensure that payments like VAT are calculated and referenced correctly, so all you have to do is log in and authorize them when prompted by doing so.
Wise also integrates seamlessly with the dashboard and only requires a simple re-authorization periodically to maintain the connection.
This makes it easy to see your position between different currencies, which is critical for any entrepreneur operating with both customers and suppliers in different markets.
Also, it is easy to integrate your different currency Wise accounts into your sales dashboard by associating each customer with their preferred 'local' bank details. Every time you raise an invoice with their name on it, the payment details are included in the local currency and format; so they have no excuse not to pay you promptly and without either party incurring additional fees.
Estonia is a small country located in the heart of the Baltic Sea Region, a rapidly growing market of approximately 100 million people in Europe. Its attractive location between East and West, excellent business environment, stable government and liberal economic policies, reasonable costs and ease of doing business have already attracted many international companies to Estonia. Estonia's economic freedom ranks among the highest in the world.
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