Estonian government IT initiative increases virtual population

Estonia innovates with e-Residency programme

Coming from Nortal, the top IT services provider in the country, Kotka was very familiar with the Estonian ID platform, which provides online services to citizens, and the back end that underpins it, known as X-road.

Kotka said state officials had played with the idea of opening up the ID platform to foreigners, but it had remained an idea. Giving ID cards to foreigners is not something a ministry official would normally suggest to his or her boss.

But Kotka acted on the plan when he first heard of it. He formed a small task force – effectively a startup – within the state structure to work on the project, and a year later Estonia started to take e-Residency applications and give ID cards to foreigners, providing them with access to government services. An Estonian e-Residency is a transnational digital identity available to anyone in the world interested in administering a business online.

The news created waves in tech media around the world, and a number of governments said they would follow. “Singapore, Dubai, Netherlands, Belgium and Lithuania have said that, in some way or another, they will copy it,” said Kotka.

Having the back end already in place, and having it constantly tested by more than one million people, gives Estonia a few years’ head start on other countries. “That is something other governments cannot copy, that is holding them back. They need to develop their IT systems,” said Kotka.

So far, Estonia has issued more than 5,200 ID cards to e-Residents from over 140 countries. Many of the early e-Residents are tech-savvy entrepreneurs who are excited about being part of something new. “The aim has been to prove that somebody needs e-Residency,” said Kotka.

So far, the numbers speak for themselves. “We have proven we are able to grow the number of e-residents even when the government has not invested any money in marketing. Now we must prove that we can actually create valid services. I really hope that basic services, such as creating a company in one click or opening a bank account without coming to the country, will be available soon.”

Developing online services for Estonia’s e-residents

To create new services, the e-Residency team joined forces with non-government organisation Garage48, which organises weekend hackathons in Baltic countries and in many developing countries in Asia and Africa. They ran one such event to find teams and ideas that could grow into new services, such as a networking platform for e-residents or easing the business registration process. 

“We need more ideas, we need more businesses, because as a government we still don’t have enough services for e-residents who want something to consume,” said Kaspar Korjus, head of operations of the e-Residency team. “So we thought let’s invite all the hackers we know and put them on one island and keep them there for 48 hours and we’ll see what is coming out from there.”

The competition was won by a team working on a one-stop-shop for visa applications – allowing e-residents to apply for visas from one portal. A secure social networking platform and a website plug-in for ID card identification were runners-up.

To develop these ideas further, and to find new ideas, Estonia is launching an accelerator programme, which will run in London, Berlin and San Francisco, as well as Tallinn.

Startup challenges

Kotka does not agree that the lack of services is the main challenge. “Our greatest challenge is that the e-Residency team is a government startup. The problem with a government startup is that governments, by definition, cannot fail, whereas startups have this failing probability coded inside.”

He and his team have minimised the risks. As e-residents pay the cost of getting the ID cards and the infrastructure has to be maintained for citizens anyway, the extra cost is limited. At the same time, the opportunity to set up an EU company from afar could be attractive for many online entrepreneurs in developing countries.

“We are still in the first year. If you look at a typical startup, they reach their maturity in the end of the fourth year, and we are in the second half of the first year.”