Fintech in Estonia: An essential guide to the local ecosystem

In recent years, Estonia has become one of the leading tech hubs in Europe, if not the world. And it’s made a name for itself in the fintech industry too. 

What makes it different from other regions for fintech? What has helped make it such an important fintech hub? And why should you consider moving your business, or partnering with a fintech, in Estonia?

I’ve been Tallinn Hub Manager at Tenity Nordics since the hub was established in 2023. Based on my decade-long experience in the local startup and fintech ecosystem, there are some key facts and trends you should know about fintech in Estonia. 

In this guide, I will cover the following:

• Key statistics about fintech in Estonia
• What’s the history of fintech in Estonia?
• What makes Estonia a great place for fintech?
• What’s the future of fintech in Estonia?
• What is Tenity’s role in the Estonian fintech ecosystem?
• An example of Tenity’s fintech incubators in Estonia

‍Interested in working or partnering with fintech brands in Estonia? Get in touch to find out more about how we can help. 

Key statistics about fintech in Estonia

As a general introduction to the local fintech scene, here are some statistics about fintech and financial services in Estonia:

According to the Fintech Report Estonia 2023, produced by the TalTech School of Business and Governance, there are 264 startups in Estonia, half of which emerged between 2020 and 2022.

Six categories of fintechs make up 87% of the total:

• Digital asset exchange (86 companies, or 33%)
• Digital lending (39 companies, or 15%)
• Enterprise technology provisioning (37 companies, or 14%)
• Digital payments (29 companies, or 11%)
• Wealthtech (24 companies, or 9%)
• Digital capital raising (15 companies, or 6%).

The same report found that 152 of these companies (58%) are three to five years old, while 38 (14%) are under three years old. Generally speaking, the vast majority of fintechs in the region are young. 

The Estonian fintech industry more than doubled, measured by volume of total assets, between 2019 and 2021. It grew from €1.03 billion to €2.24 billion. Crucially, 89% of the total value came from fintechs focusing on digital asset exchange, digital banking, or digital lending. 

Other general statistics about Estonia’s tech and business environment stem from Estonia being among the most digitised countries in the world:

• 99% of financial transactions made digitally
• 99% of government services supplied digitally
• 99% of tax submissions made digitally

The country also regularly ranks in first place on the tax competitiveness index, measured by the Tax Foundation, owing to an uncomplicated tax system.

What’s the history of fintech in Estonia?

For a complete picture of Estonia’s history of fintech, we need to go back to the 1990s when Estonia started rebuilding its country after restoring independence. Estonia used the opportunity to build a modern, tech-enabled state, in order to keep the civil service lean and equip the broader population with computers, internet access and digital skills.

One of the major parts of this state project was the e-Estonia programme, which focused on making Estonian society more digital and technologically advanced. For instance, in 1994, the government published the Principles of Estonian Information Policy, which committed 1% of GDP in state funding for IT. 

In the two decades since, Estonia has become a global leader in digital services. In 1996, for example, Estonian banks offered online banking services, to reduce the staffing needs of branches in remote communities. By 2000, all tax declarations were submitted online, taking as little as three minutes to submit. 

The early noughties brought two innovations that would be critical for future fintech developments:

• In 2001, X-Road was developed. It’s a distributed data exchange layer for registers and information systems, which reduces data exchange costs, prevents data leaks, and allows public and private sectors to easily share financial data.
  
  
• In 2002, the e-ID card was introduced, and now 98% of Estonians have one. According to the e-Estonia website, digital signatures using e-ID cards have saved 2% of GDP. 

Scandals and attacks have led to a strengthening of Estonia’s tech and fintech sector. For instance, in 2007, Estonia was hit by the largest organised cyber-attack against a single country to date. In response, Estonian cryptographers built the blockchain technology, KSI—and blockchain remains one of Estonia’s tech strengths. 

Similarly, in 2018, details of a money laundering operation at Danske Bank emerged. Since then, Estonia has committed to regulation to prove its clean operations. 

All of these measures have been led by the Estonian government, which has been committed to building a digitally advanced society. As a result, the country has become a really attractive place for fintech because much of its data is open, i.e. available in public and machine-readable form, with the regulatory support for consent-based sharing. Indeed, the state is developing systems laws based on Real-Time Economy principles. 

What makes Estonia a great place for fintech?

Estonia is an exciting place to partner with fintech, or to licence your own financial technology company. There are three main reasons why. 

1. Estonia’s digital infrastructure is world-leading

As the history of fintech in Estonia shows, the nation’s digital systems are among the best in the world—particularly when it comes to finance. 

Tax is processed and paid online, while financial transactions are practically all managed digitally. As a result, Estonia is regularly named as the most digitally advanced country on the planet. 

What does this mean for fintechs?

From my experience, fintechs that operate in Estonia often greatly appreciate how digital-savvy the country is. Compared to other more bureaucratic European countries, the way that financial transactions can be processed and authorised is frictionless. For instance, where in other countries transactions such as trading or transferring company shares, buying or selling real estate, or attesting credentials, may need to be verified by notaries, in Estonia this can be done digitally. 

In fact, everything fintechs need to do, from setting up to selling to reporting, can be done online. For instance, thanks to X-Road, data sharing is incredibly smooth, and the government is committed to making data available in machine-readable form. It’s secure too, thanks to verification through the e-ID. 

Overall, Estonia is a comparatively easy place for fintechs to operate because it’s easy to set up a company and all of these digital processes mean that fintechs can roll out solutions quickly and affordably.

2. Estonia is a global hub of talent and investors

Estonia’s small population of 1.4 million people may not make it sound like a hub of global talent. But the talent is there and, thanks to the country’s size, it’s relatively easy to access. 

For instance, if you want to speak with the financial industry, it’s relatively easy to get representatives of the nation’s four largest banks around the table. Similarly, tech skills are easy to come by, thanks to the government’s considerable investments in IT education. 

The flourishing fintech scene has helped to attract global talent, too. For instance, Skype and Wise were both set up in Estonia, and Wise has its largest global offices in Tallinn. Whether you need a software developer or a fintech lawyer, you’ll find the expertise only a short distance away. 

The same is true of investors. There is now venture capital and many fintech investors in Estonia, such as Tenity, who understand the space and can help fintechs along their development path. More recently, these have included larger investors, such as Plural, with its €400 million fund.

The government has introduced many measures to make Estonia attractive to international talent as well. For instance, thanks to the e-residency scheme, entrepreneurs can set up a business in Estonia even if they’re not resident here. There’s also a specific startup visa too. 

3. Estonia can serve as a valuable testing ground for fintechs

Estonia is also a great place for fintechs to experiment and test their products before they scale—for three main reasons. 

Firstly, there’s the small population. This means that fintechs in Estonia have to launch with intentions to scale internationally. While many successful Estonian fintechs are B2C, there’s not a large enough domestic market for sufficient growth. As such, fintech business models have to allow them to grow internationally almost from day one. 

What’s useful, though, is that the population here is very digitally savvy. They’re often willing to try out new products—if those products deliver value. This can be really useful for fintechs when assessing user experience and testing their product on real customers. 

Secondly, if fintechs can secure a licence to operate in Estonia, they can also operate across the EU. This makes Estonia an ideal base for access to larger, more lucrative markets. In particular, Estonia acts as an important gateway to the Nordics and the Baltics. For instance, it has close relationships with Scandinavian banks and other institutions. To qualify for a licence, however, the company should have some experienced members of the management team based in Estonia and also serve the local market.

Finally, testing financial products is easier in Estonia than in many other countries. This is largely thanks to the state’s digital infrastructure. For instance, this allows fintech payment solutions to access data (including information from business registry, tax, and financial information) in a machine-readable form. It’s a convenient way to test products before expanding to more complex markets. 

What’s the future of fintech in Estonia?

With decades of strong growth behind it, we expect Estonia’s fintech ecosystem to continue to grow in future. 

Something we’re particularly excited about is Estonia’s national fintech strategy led by FinanceEstonia. It’s expected to set out measures to improve the environment for domestic and foreign fintechs alike, and determine the direction of future government investment in developing the fintech ecosystem. 

What’s more, Estonia’s Financial Supervisory Authority is looking to activate the regulatory sandbox in 2024. This will offer space for companies to test their novel business models while working with regulatory institutions to align on exact licensing requirements. 

At the same time, Estonia continues to clean up its operations after two financial scandals around money laundering and crypto currencies. Greater regulation on digital assets, for instance, will reinforce the nation’s reputation as a reliable and attractive fintech hub.

What are some well-known fintechs in Estonia?

Some well-known Estonian fintechs include:

• Wise. Previously known as TransferWise, Wise was founded in Estonia. Now, it’s headquartered in the UK, but its largest offices are in Tallinn. Wise is worth $8.6 billion. Additionally, two of Estonia’s other largest fintechs—Lightyear and Grünfin—are both Wise alumni.
  
  
• Lightyear. A stock-trading app founded in Estonia by employees of Wise. Lightyear has now launched across the EU and the UK and has secured over $81 million in funding.
  
  
• Grünfin. Another Wise alumni, Grünfin is a retail investment platform for funds with positive ESG factors. It has raised €2 million in funding.
  
  
• Salv. An anti-money laundering (AML) platform, Salv uses smart technology to reduce non-compliance and financial crime. It’s now valued at $22 million.
  
  
• Arbonics. Arbonics is a pioneer in nature tech, building the highest-quality scalable forest carbon removal platform in Europe. It’s worth €7.3 million. 

• Zego. An insurance company for car, scooter and van delivery drivers. It’s valued at $1.1 billion.

• Veriff. An automated identity verification software. It’s valued at $1.5B.

What is Tenity’s role in the Estonian fintech ecosystem? 

Tenity started out as an open innovation programme as part of SIX, the Swiss Stock Exchange, in 2015. We set up our Estonia Hub, which I lead, in August 2023. It’s part of our Nordics & Baltics fintech ecosystem, which is headquartered in Sweden. 

There are three main tasks we perform at Tenity. 

1. We act as matchmakers between financial institutions and startups

At Tenity, we help incumbents learn about and collaborate with fintech startups. At the same time, we help startups benefit from funding from, exposure to, and partnerships with these incumbents. 

Ultimately, we see ourselves as matchmakers, linking fintech expertise together in a local ecosystem. In practice, this involves:

• Running our own startup incubation programmes. At the end of 2023, we completed our second batch of incubators, this time focusing on impact and sustainability. Currently, our Nordics Pre-Seed Incubator Batch 4 is open to applications and it will be held between August and December 2024.
  
  
• Working with financial institutions to run their own custom startup accelerators. Over the years, we’ve worked with institutions including UBS, Franklin Templeton, and Julius Baer.
  
  
• Investing and helping corporations to invest in startups. This way, we help to stimulate and support the local fintech ecosystem.

Whatever we do, we’re entirely focused on fintech. This way, we give all our partners—corporates, startups, and investors—the opportunity to work in a highly specialist environment. 

2. We invest in fintech startups

As part of our accelerators, we also invest in fintech startups. Compared to other accelerators—which don’t typically offer funding—this makes our programmes really attractive. 

We invest €50,000 in all of the startups selected for the programme, in exchange for an equity stake of 2.5%. This way, we can get involved in fintechs—particularly those at a very early stage—that others miss. 

At Tenity, we also help corporations and investors to invest too. They can invest directly when they attend our accelerators or Demo Days. Or they can do so via our fund, where they can invest automatically in 300+ startups. By investing in many different startups at once, they increase their chances of a higher ROI.

Again, this is part of our role as matchmakers. It’s a way that we can help make the Estonian fintech landscape flourish. 

3. We help financial corporates solve their innovation challenges

Tenity helps corporations solve innovation challenges, no what stage of their innovation process they’re at. Across our hubs in the Nordics, Switzerland, and Singapore, we’re a central player in all things innovation within the fintech and financial sector. 

Part of solving these challenges is to connect corporations with startups that are working on similar problems. But we can help to guide corporations' innovation strategies too. For instance, we work with incumbents to explore up and coming themes within the fintech space.

An example of the fintech incubators Tenity runs in Estonia

Until May 2024, we’re accepting applications for our fourth fintech incubator in Tallinn. To give you a sense of what fintechs can expect from this programme, let’s take a look at our second batch, which we held in late 2023. 

The cohort focused on themes in fintech and insurtech, including Web3, Blockchain, cryptocurrencies and AI. Plus, as Tenity Nordics focuses on climate fintech, four of the startups have solutions addressing sustainability and impact issues.

The startups included:

• Daysave (Finland). Daysave helps the young to start to save and invest by sending personalised deposit requests weekly. It effectively creates an automated, personalised, and engaging user journey—like Duolingo. 
  
  
• Equintel (Germany). Equintel uses Big Data and AI to deliver ESG assessments. Their primary goal is to achieve transparency and objectivity in ESG and address the major shortcomings of ESG reporting and ratings. 
  
  
• GeekPay (United Kingdom). GeekPay is an all-in-one toolbox to streamline, track and secure payments in digital currencies.
  
  
• Greencent (Germany). Greencent is a new generation loyalty system in the form of an app measuring and rewarding reductions of CO2 emissions resulting from activities performed by individuals in mobility.
   
• InCharge (Netherlands). InCharge provides a loan management platform.
  
  
• Kvikk Insurance (Norway). Kvikk is a digital platform for insurance. They aim to make all processes with insurance simpler, faster, and clearer, from purchase to claims.
  
  
• Root (United Kingdom). ​​Root is a platform to mobilise a new generation and community of activist retail investors who can combine their voices to engage with the companies in their portfolio and drive real change.​ 

During the four-month programme, the startups received training and mentoring from Tenity’s experienced team of experts. They also enjoyed custom breakout sessions to address specific challenges and opportunities in the Nordics & Baltics region.  

"The Nordics-Baltic region has a thriving startup ecosystem,” says Anders Norlin, Head of Nordics & Baltics at Tenity. 

“As Estonia is a young nation, without any legacy industries, the whole society, from government level to universities, is focused on stimulating and supporting startups. And for any early-stage startup coming to Tallinn, as in our incubation programmes, the environment for connecting with all relevant stakeholders is unique."

Fintech in Estonia: An exciting digitally advanced ecosystem 

Estonia is a great place for a fintech company if you’re looking for diverse talent, easy opportunities for product testing, and strong government support. 

At Tenity, we’re proud to be one of the major players in the nation’s fintech ecosystem. If you’d like to learn more about what we do at Tenity, reach out to us.