why an estonian bank account is not necessary for most e-⁠residents

Katrina Koppel • Feb 16, 2024 • 7 min read

E-⁠residents have several options when it comes to business banking, and the best solution is usually not the one you might think

e-residents don't need a bank account for certain — Photo: Tanel Meos

It's a commonly held misconception that having an account with an Estonian bank, or an Estonian IBAN, is a mandatory requirement to start a business. Today I want to dispel this myth.

It’s important to say right at the outset, that for many new e-resident entrepreneurs, opening a bank account in Estonia with a traditional bank will have requirements which will be hard to fulfil (such as the ability to travel to Estonia for an in-person meeting with a bank), or having a strong connection and business presence in Estonia.

Fear not! There are several alternatives, which I cover below.

E-residents do not need an Estonian bank account
Beware of IBAN discrimination
Fintechs and other European banks are great alternatives for e-residents
When might an Estonian bank account become necessary?
Ultimately, banks and fintechs have the final say on who they take on as clients

1. E-⁠residents do not need an Estonian bank account

The e-⁠Residency team often hears the misconception from e-⁠residents that they are required to have an Estonian bank account. But why is this? Most likely, the misconception stems from the fact that other countries require this step to start a company.

In Estonia, this is not the case. In addition to being a low-bureaucracy environment for business in general, Estonia is also a forerunner in specific aspects like banking too.

The fact of the matter is that having a bank account with an Estonian bank or access to an Estonian IBAN is not a requirement for Estonian companies - whether founded by a citizen, resident or e-⁠resident. Estonia allows companies to use any EEA (European Economic Area) business banking account - with a traditional bank or a fintech. This means e-⁠residents can make your company’s share capital contribution and complete any other processes required of an Estonian company with an EEA account.

Banking basics for e-residents

E-residents can choose from several business banking options, depending on their physical location, operational needs & prior banking relationships.

2. Beware of IBAN discrimination

Another possible reason for the misconception relates to IBAN discrimination. In support, I’ve heard anecdotal evidence that many e-⁠residents are affected by this.

IBAN discrimination is when a bank, client, service provider or other company requires the IBAN of a person or business they are transacting with to have a particular country code. The most common example is where an eCommerce platform does not accept another country’s IBAN for an Estonian company (or specifically requires an Estonian IBAN).

Please be aware that if a service provider requires you to have an EE IBAN to serve you or has requirements demanding your company’s IBAN to match your company’s registration, this may be a case of IBAN discrimination. IBAN discrimination is not legal between EU member states and is monitored by EU institutions, although enforcement has historically been low. You can read more about IBAN discrimination in the blog post linked below or file an official complaint with the European Commission.

IBAN discrimination affects many e-residents

Community surveys show this problem affects many e-residents, so e-Residency has joined the movement to end it.

3. Fintechs and other European banks are great alternatives for e-⁠residents

As e-Residency is itself an excellent solution for managing your company entirely online and remotely, it’s likely not surprising that most e-residents choose to use a fintech as their banking solution instead of more traditional banking options. Whereas the KYC (know your customer) processes of most banks, including Estonian banks, require an in-person appointment to open accounts for new customers, fintechs are set up to allow any authentication and verification processes to be completed entirely online. You can browse examples of fintechs used by e-⁠residents at the e-⁠Residency Marketplace.

There are some differences between using a bank and a fintech, some of which are likely familiar to most entrepreneurs. From mobile banking apps to AI-powered financial advice, fintechs are constantly innovating to make financial transactions smoother, more secure, and more personalised, often outpacing traditional banks. Naturally, banks are also making strides in adopting technology, but they often face challenges due to legacy systems, which can result in slower innovation and less flexibility. For entrepreneurs, this means having to weigh the convenience and innovation offered by fintech startups against the stability and familiarity of traditional banking institutions when choosing where to entrust their finances.

Read more about Payment institutions & fintechs in the EU/EEA on our Knowledge Base

If your personal preference does fall on the side of traditional banks, opening a business bank account in a bank in another EEA country of which you may already be a customer is a great solution. This can have the benefits of convenience, streamlined banking options and familiarity and trust with your bank. A large part of the difficulties an e-⁠resident can face in opening a bank account in Estonia does come down to KYC practices. When taking on a new client, a bank will always want to thoroughly assess possible risks. A bank already familiar with you however might be more willing to offer an account to your Estonian company, given your prior good relationship.

Read more about Banks in the EU/EEA on our Knowledge Base

4. When might an Estonian bank account become necessary?

There are few circumstances in which an Estonian bank account might be required by e-⁠residents. But of course, there can be situations in which having an Estonian IBAN might become necessary or practical.

One such case is where an e-resident seeks to operate in one of the more heavily regulated business activities, where additional requirements and a licence are required. For example, providing financial services like crypto wallets. Here is a list of all fields of activity which are subject to any licences or special notification (the link opens in the Estonian language by default, but you can choose to change to English at the top left of the screen). In general though, business licences are required for very select industries and activities, and so this exception will probably not affect the vast majority of e-⁠residents.

If you are operating a business that requires a licence, or think you need an Estonian bank account for your business, we strongly recommend consulting a service provider on options. They will be able to give you the most accurate and detailed advice and may even be able to help you in this process!

If you’d like to hear more about the process of becoming a client of an Estonian bank, check out this webinar recording:

Please to watch this video.

5. Ultimately, banks and fintechs have the final say on who they take on as clients

I want to end on a key aspect of business banking as an e-⁠resident.

Please be aware that being an e-⁠resident does NOT guarantee access to an Estonian or EU/EEA bank account.

Each bank has their own risk assessment, KYC and onboarding processes unique to them and ultimately, as private entities, a bank will have the final say in who they take on as a client.

Another thing to take into account is banking access exclusions based on citizenship or residence. Due to tightening AML/CTF regulations and compliance procedures in the global financial system, banks and fintechs exclude people from certain countries. This means that some entrepreneurs might not be able to obtain international bank accounts, if they live within a jurisdiction that is globally sanctioned or categorised as ‘high risk and non-cooperative’ by the Financial Action Task Force (FATF).

This article was written by Katrina Koppel, Customer Support Quality Manager at e-⁠Residency. If you have ever written to our support team, Katrina may have assisted with your query.

Find more in-depth, support-focused content on the e-Residency Knowledge Base.