Banking for e-Residents
Banking is definitely the biggest headache for most e-residents. Due to the AML regulations, Estonian banks are reluctant to work with non-residents. Though each account opening is decided on an individual basis, it’s fair to say that some businesses have more chance of getting the account opened than others. For example, one-man companies operating in the software industry have a good chance of getting their account opened with Estonian banks such as LHV or Coop. Companies owned by other legal entities with more complex structures will have more difficulties. It’s just how some banks try to minimize their risks, although it’s normal to have subsidiaries and operate with a fitting company structure.
Additionally to LHV, there are several banks that you can get in touch with within Estonia. The biggest ones are SEB and Swedbank, but there are more options: Tallinn Business Bank, Luminor, Citadele, and some others. See below for Estonian IBAN for e-residents.
Estonian banks LHV and Coop
It’s usually difficult to get a decision from the bank if they will open an account for your company or not. But with LHV and Coop, you can fill out the application form on their website and get a pre-approval – you won’t have to travel to Estonia only to find out they won’t work with you.
If you are going down this route, please consult with your service provider; they can help increase your chances of getting positive approval.
For LHV you will need to fill out the application from their Opening a bank account for a non-resident page. Note that, you should choose either a Private client or a Business client if it’s for the company than a Business client.
Recently Coop Pank started cooperation with the e-residency program. This means that they are also open for e-residents, given that there is a substantial connection to Estonia as well.
Both Coop Pank and LHV banks are based on Estonian capital, which means that they are “local banks”, compared to Swedbank and SEB, which are Nordic-owned banks. Both Coop and LHV are listed in the Nasdaq Baltic stock exchanges Coop Pank as “CPA1T” and LHV Group as “LHV1T”
If you won’t succeed with a bank account opening in Estonian banks, then what are your options? You can definitely try banks in your own country if that is feasible in your situation. We’ve got some clients that have eventually worked with banks of their own jurisdictions. Additionally, there are Fintech solutions. Fintech solutions are usually operating under the e-money institution license (EMI), and they can provide most of the services that you’ll need.
Banks VS EMI
Banks are deposit-taking institutions, providing lending and payment intermediation services. Banks are licensed by a central authority in each country where they operate, and are subject to tight fiscal constraints and supervision. In general, banks have to be funded with a large capital base. Banks are required to report to the central authorities at least quarterly and have to keep a predetermined level of liquidity – the ratio of cash and short-term assets to liabilities. Generally, these obligations lead to banks adopting more conservative practices in conducting business, and in being more rigid in terms of services offered and inability to adapt their services to changes in the market. It is for these reasons that the explosion in the financial services sector has happened since businesses have been changing faster than the banks could accommodate.
On the other hand, electronic Money Institutions (EMIs) represent the digitalization of financial services. In general, an EMI can be registered with startup capital. EMI can also provide IBAN accounts, payment cards and e-wallets. Some e-money and payment institutions allow you to open accounts or hold money with other firms from within their app or website, and these other firms might be banks that do have FSCS protection, but Since EMIs don’t use their customers’ money to lend it, unlike banks, the customers’ funds are safe, encrypted and secured on their accounts.
Here are some of the EMI solutions to try out:
Revolut
What is it?
Revolut is a British financial technology company that offers banking services. Headquartered in London, it was founded in 2015 by Nikolay Storonsky and Vlad Yatsenko. Revolut offers banking services, including GBP and EUR bank accounts, debit cards, fee-free currency exchange, stock trading, cryptocurrency exchange and peer-to-peer payments. Revolut’s mobile app supports spending and ATM withdrawals in 120 currencies and transfers in 29 currencies directly from the app. Revolut is currently available for North American and EEA residents only. Currently, one of the highest valued Fintechs in Europe.
Where is it regulated?
Revolut Bank UAB is licensed by the European Central Bank and regulated by the Bank of Lithuania. Since March 24th 2022, Revolut is also operating as a fully licenced bank in Ireland and funds of up to €100,000 are guaranteed by the Lithuanian State company Deposit and Investment Insurance. Revolut also submitted its application for a UK banking licence after operating as an e-money institution in the UK for nearly seven years now.
Paysera
What is it?
PaySera is another frequently-used digital banking option for e-residents. Founded in 2004, Paysera is a fintech company that provides fast, convenient, and affordable financial and related services worldwide. The company provides both daily banking services, such as transfers, currency exchange, payment cards, etc., and exclusive products such as an event ticketing system, SMS payment platform, QR code payments, transfers by phone number, payment solutions for schools, and other individual business solutions. In the Baltic States, Paysera is known as the leader in e-commerce and as a reliable and secure partner because of its unique payment collection solution, “Paysera Checkout”.With a Paysera IBAN account, you can transfer money quickly and easily in many different currencies across the world.
Where is it regulated?
Paysera is a 100% Lithuanian capital company. Since 2012, Paysera is a licensed e-money institution with the right to execute the activity related to the issuance of e-money and provision of payment services all around the European Union. The e-money institution license was issued by the Bank of Lithuania. All funds transferred to your Paysera accounts are separated from the funds of the company and cannot be used for company needs, loaned or invested. All money is kept only in reliable credit institutions of the European Union.
iCard (Previously LeoPay and LeuPay)
iCard AD is an EU E-money Institution, licensed by BNB in Bulgaria, number 4703-5081, providing cross-border services in all EEA countries under EU passport rules, Principle Member of MasterCard, VISA, JCB, UnionPay, Bancontact, Borica and other schemes
TransferWise (now Wise)
Wise is the best-known Fintech for e-residents, and one of the household names in the whole industry. Wise (formerly TransferWise) is a London-based financial technology company founded by Estonian businessmen Kristo Käärmann and Taavet Hinrikus in January 2011, which can explain the connection to the Estonian e-Residency program. With investors like Richard Branson and PayPal founders Max Levchin and Peter Thiel, Wise has become a trusted institution for sending money abroad. It’s free to apply for the Wise account, but they do have quite strict policies, and it’s not possible for high-risk industries to open an account with Wise.
Wise is regulated in multiple countries; the list can be seen from Wise article.
PayHawk
What is it?
Payhawk is the financial system of tomorrow that combines credit cards, payments, expenses, cash management, and pre-accounting into one integrated experience to give you maximum control and visibility over your business spending. Payhawk accepts only companies from European Economic Areas (EEA) and UK.
Where is it regulated?
Payhawk Visa Cards are issued by Payrnet Limited, authorized and regulated in the United Kingdom by the FCA as an Authorised Electronic Money Institution. Customer money is being kept safe in segregated, safeguarded accounts of our cooperation banks.
Estonian IBAN for e-residents
We mentioned that some e-money and payment institutions allow you to open accounts or hold money with other firms from within their own app or website, and these other firms might be banks that do have FSCS protection. There are two providers out there that issue Estonian IBAN. As a matter of fact, the IBAN is from LHV one of them is Wamo
Wamo
What is it?
All-in-one financial management platform that makes it easier, simpler and faster to stay on top of running a business. Wamo provides an EE IBAN and all the needed EMI banking services.
Where is it regulated?
wamo.io LTD is incorporated and registered in the United Kingdom under the company registration number 12352849 and the operational office of which is at WeWork, 199 Bishopgate, London EC2M 3TY. wamo operates the wamo.io website and the app. wamo is not a bank, the current account is an e-money account. Issuance of Electronic Money and payment services are provided by PayrNet Limited. PayrNet holds an amount equivalent to the money in the wamo current accounts in a safeguarding account which gives the customers protection against insolvency. Wamo is authorized by the Financial Conduct Authority under the Electronic Money Regulations 2011 (register reference 922901) for the issuing of electronic money. wamo is an EMD agent of PayrNet.
This is not a conclusive list, and there are more opportunities out there.
Conclusion
According to our experience, it’s very rare that the e-resident can not get the bank opened at all. Matter of fact, we’ve never seen it happen except once, but the reason was the conducted business, nothing else. That being said, sometimes you really need to have an Estonian IBAN to use some of the payment options (like Paypal).
Which is the best option for you? Well, it depends on your business. For a low-risk business, I would go for LHV or TransferWise. If it’s a high-risk business, then you have different options – often more expensive banking options due to risk involved. Either way, there are solutions for everyone, it’s just a matter of finding them.
If you’re looking for banking options and you have a high-risk business or have been rejected from the most known banking options for e-residents let us know and we can also help you out!
To your success!
