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Digital Transformation

e-Estonia: How Estonia became one of the most digital countries in the world

December 6, 2022

How did Estonia become the most digital country in the world? We spoke to Unifiedpost Estonia's Country Manager, Andrus Kaarelson, to learn more about Estonia's digital landscape and why the country was so quick to adapt to digital processes.

e-Estonia, a name branded by the country itself due its vast digital technology use. But how did Estonia, a European country of only 1.3 million people, become such a digital adopter?

We talked to Unifiedpost Estonia’s Country Manager Andrus Kaarelson to find out more. With over 25 years of digital and electronic invoicing experience, Andrus knows a thing or two about Estonia’s digital adoption. Read on and learn about Estonia’s public sector digital initiatives and why the private sector hasn’t kept up to the same pace.

e-Estonia: Where did it all begin?

Andrus answers, “in the middle of the 90s, just five years after our re-independence”. Following Estonia’s re-independence, the country had limited resources and budget. Estonia had no choice but to create efficient and impactful public sector initiatives.

One of the first government initiatives was the Tiigrihüpe (Tiger Leap) programme, which began in 1996. Tiigrihüpe increased computer use and network infrastructure, especially within Estonia’s educational institutions. It is clear to see the programme’s effects, as 99% of Estonia’s population use the internet on a regular basis.

The same year also saw Estonia’s e-cabinet, one of the first electronic cabinets in the world, and Estonia’s launch of e-banking services. Cabinet meetings began to take place without the need for paper, and banking was accessible 24 hours a day, 7 days a week from the comfort of Estonian citizens’ homes.

The public sector digital services certainly didn’t stop there.

In 2000, Estonians could declare their tax online via e-tax. A service which 98% of the public now use. In the same year M-Parking began - a mobile parking service that allowed citizens to pay for city parking via SMS. And in 2001, the launch of X-Road revolutionised the way government databases securely connected.

The list continues. E-identity cards and e-signatures launched in 2002, voting via the internet in 2005 and sending of the first business-to-business (B2B) e-invoice in 2007. So no more scanning passports, no more paper contracts and no more standing in line to vote.

Is there anything left? Andrus can think of two public services that cannot be completed online. Getting married and buying property. However, even these two services have seen more online use since the COVID-19 pandemic, due to the need for video consultations and calls.

e-Estonia: Why the great digital uptake?

Andrus says that the country had to do something big to get the most out of their limited budget and resources. The country took initiative and created efficient services at a low cost.

Andrus says that in some ways it is obvious. For example M-Parking, the public sector initiative to pay for parking via SMS.

How has digital uptake forced change?

Andrus believes that Estonia has not been completely democratic in their digital adoption. Changes are implemented without much say from the citizens. But perhaps this is the best way of working?

Andrus talks about countries such as Sweden and Finland. Such countries created digital public sector initiatives, just like Estonia, but on a more voluntary basis. These initiatives work but the uptake is slow. Governments are forced to keep existing services, upkeep new digital services and spend time and resources on both. Not a luxury that Estonia had. By forcing change, Estonia’s citizens were not only quick to adopt new public sector ways of working, but they were quick to see the benefits too.

However, the same cannot be said for the private sector.

Estonia’s private sector: Why hasn’t digital uptake accelerated as fast?

Estonia is number one on The Digital Economy and Society Index for digital public sector services, but 15th on the integration of digital technologies within business.

Estonia consists mainly of SMEs. Just above half of those SMEs have a basic level of digital intensity, which is below the EU national average. Only 10% of SMEs use big data and only 3% use AI solutions.

The government is taking notice and putting the right schemes in place. Schemes such as AI & Robotics Estonia (AIRE) and the Digital Innovation Hub (DIH), two schemes which aim to help businesses accelerate digital transformation. The government also made electronic invoicing (e-invoicing) mandatory for business-to-government (B2G) transactions. Electronic invoicing can increase digital technology use, but in Estonia this hasn’t happened at a fast rate.

When asking Andrus why this is the case, why private vs public sector digital uptake is vastly different, he states that forcing change in the private sector may not work as well. Change has to be understood and the business benefits have to be clear. He expands on his theory in relation to business electronic invoicing.

Electronic invoicing in Estonia

In 2019, Estonia mandated business-to-government (B2G) electronic invoices. Business-to-business (B2B) mandates have no confirmed dates, but why? Especially when many other European countries, less “digital” countries, have adopted B2B mandates at a faster rate?

Andrus believes that electronic invoicing and business digital transformation needs to be a learning curve. Businesses need to learn the benefits before they make drastic changes.

Many countries with mandatory e-invoicing in place, have found that their businesses send e-invoices for tax authority clearance, but still send PDF and paper invoices with each other. Proving that mandatory e-invoicing does not necessarily increase digital use. Businesses need to be driven by the benefits or by other businesses.

This is starting to happen in Estonia. Larger Estonian companies can see the benefits. They understand that digital business automation cuts costs and streamlines processes. They are starting to work only with electronic, digital processes, thus forcing their smaller partners to adapt. The larger businesses in Estonia are the ones forcing the change.

The only setback is that this process takes time. As Estonia consists mainly of SMEs, the forced change is slow. But it is a change that creates and encourages full business automation.

So what is next for Estonia?

Apart from getting married and buying a house online, Andrus believes the next big step is mandatory B2B electronic invoicing. He hopes that many businesses will be accustomed to e-invoicing and already understand the benefits of digital business automation.

To stay up to date with Estonia’s next mandates, as well as regulation changes from all over the globe, sign up to our email newsletter and receive updates straight in your inbox.

Want to know even more about Estonia and the current offering from Andrus and his team? Take a look at Estonia’s global and local solutions and discover how your business can benefit from electronic invoicing adoption.

Andrus Kaarelson
Unifiedpost Estonia's Country Manager

Andrus Kaarelson has over 20 years of experience in developing e-services and IT solutions. He is also a Member of the Management Board for the Estonian Association of Information Technology and Telecommunications ITL.

Connect with Andrus on LinkedIn
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