In our previous post, ” Opening a bank account in Estonia“, we discussed how to open a bank account in LHV in Estonia, and mentioned the possibility of using digital solutions such as Wise. In this article, we want to highlight the best digital banks to operate with your company in Estonia.

This article deals exclusively with digital solutions for businesses. For your personal finances, there are solutions such as Revolut, N26 or Monzo, which we will talk about on another post.

What are digital banks?

Digital banks are online entities that either have a banking license or work with an entity that has one. They offer a bank account (some of them even one per currency, for example, an IBAN for your euro account, a US account number for a dollar account, etc.) and a debit or even credit card.

As a result, you can use them operate as you would with a traditional bank account: receive payments from your customers, pay your providers, and even use your card for justified expenses of the company.

It’s basically like having an account at a traditional bank, with some  important differences:

  • You can not  apply for loans
  • You may not, depending on the fintech, distribute capital either (eg for investors or stakeholders)
  • You will not earn interest for the money you have accumulated
  • Although you have a unique IBAN number, it may not be -depending on the fintech- a “real” bank account, but an address associated with an electronic wallet. However, you can receive payments, send transfers and operate normally.
  • Although your money is safe, and these types of solutions are 100% reliable, some of them are not protected by the European Deposit Guarantee Scheme (DGS), as in a traditional bank account.

Currently, solutions such as Wise don’t have a banking license adhering them to the DGS, while others such as Revolut do.

When is it advisable to open a traditional bank account?

With very few exceptions, it is very difficult that your company is going to need a traditional banking solution. Fintech solutions today are more convenient, technologically advanced, and can be opened and managed entirely online. Not only that, but many of them, like Revolut, have a banking license, so your money is protected by the European guarantee fund. Others like Wise do not have this fund, but they keep their clients’ deposits in separate accounts managed by JP Morgan Chase, so that even if Wise went bankrupt, your company’s funds would be safe.

There are traditional banking entities in Estonia that work without problem with e-Residents from all over the world. One of them is LHV. Despite having offices there, like any traditional bank, they allow you to operate with them without being a tax resident in Estonia.

This is a great advantage when you compare it with other solutions to create a company like Ireland or the United Kingdom where, in most cases, you need to prove that you are a resident in the country.

However, to open an account there, you will need to visit Tallinn at least once and meet with the LHV staff. This is because of the KYC policy -Know your customers-. Basically, they need to guarantee that your business is legitimate, and you are not a terrorist or into money laundering.

Most Estonian traditional banks will apply a monthly fee for their banking services to e-Residents. LHV charges a €20 monthly maintenance fee for companies founded by e-Residents who are not physical residents in Estonia. This is more costly than solutions like Wise (though not as much as Revolut Business, which as of September 2018 applies an initial fee of € 25/month, but offers a lot more to be honest).

Having an account in a traditional bank can be advisable if:

  1. You don’t mind visiting Estonia. This is probably the most important factor to consider. If you are a digital nomad, travel regularly, or you are attracted by the idea of visiting the Baltic country, do not forget to add the LHV offices to your itinerary.
  2. You have a good reason for opting for a traditional bank, or a fintech solution is not appropriate for your company for a very specific reason. There are many misunderstandings when it comes to what a traditional bank can offer that an online solution can’t, so don’t hesitate to ask us.

Our recommendation is to use a traditional bank such as LHV only if you have a good reason not to use a digital solution.

When is it advisable to operate with digital banks?

Luckily there are completely digital alternatives to your service. One of the most frequent prejudices we find against this type of solution is the false assumption that they are not “real bank accounts” or there is no “real bank” behind them. Today, with solid Fintech banking companies such as Wise or Revolut, that is simply not true.

In fact, many e-Residents with companies in Estonia operate exclusively with digital solutions.

If you are a digital nomad, a freelancer or small business owner, an account in a digital bank is the perfect solution for you. You can operate, receive payments from your customers, have your bank account with IBAN and Swift / BIC and your card.

You can even start with Wise, for example, and later when you have some free time and your business is well established, take a trip to Estonia if you still think you need a traditional bank.

And the best of all? You can open your company in Estonia and operate it entirely online, without stepping on Estonia.

Digital banking solutions for e-Residents

So now that you know that a digital banking service may be a good solution for your business, let’s have a look at some of the best solutions currently available.

Wise

Wise

Wise started as a small startup solving the problem of international money transfers. Its main selling point was reducing currency conversion and international transfer fees to a bare minimum. Soon, the digital nomads began to use it as an alternative to pay and receive payments. It was a perfect solution for them.

In those early days, they did not offer a complete digital banking solution: you did not have an IBAN or debit card. Ironically, being one of the pioneers in the new fintech revolution, it took them a long time to finally offer a full banking alternative similar to Revolut.

Wise’s solution is called “borderless account“. It allows you to open a virtual bank account for each currency, which you manage seamlessly from the same Wise account. Let’s say, for example, that you are a web designer working for clients from Europe and the United States. In that scenario, you would create two virtual accounts, one in euros and another one in dollars.

As a result, you would receive payments from your customers in France, Spain, and Denmark in your account in Euros, and from your North American customers in your account in dollars. In the end, all the funds would go to your Wise account. The account has no monthly fees, only a commission between 0.35-2% when changing currencies, and a small fee of € 0.60 each time you transfer money from a local account to your Wise account or vice-versa.

For small businesses and professionals working for international clients, it is an incredible solution. The Wise dashboard is simple to use, and the process of creating your account is super simple. However, there are a few problems that you have to consider if you consider using Wise.

We have an agreement with Wise to help you during the validation process of your bank account. In practice, it will mean less paperwork for you and being able to open the bank account without having a physical office in Estonia or needing utility bills.

Revolut

Revolut Business

Revolut is one of the leaders of the recent disruption of the banking industry. They were one of the very first to offer virtual bank accounts in multiple currencies. Without a doubt, its greatest asset is its App, so simple to use that operating with your money online becomes a real pleasure. If you’ve never used Revolut, the first time you install and start using it, you’ll understand what “the future of banking” means. The experience is just superior to any traditional bank.

Even their KYC -know your client- verification process is fun.

After the success of their personal online banking solution, they launched Revolut Business, aimed at businesses. This account works basically the same as the personal version, but for your business. It allows you to have a multi-currency account also, and also a business debit card of course. In this case, a Prepaid Mastercard card.

The only requirement to request such an account is that your company is established in a European country, like Estonia.

Some details to consider about Revolut Business

There are some details you should consider before opening a Revolut Business bank account for your company.

To begin with, as in the case of Wise, Revolut can issue a certificate stating that you have paid € 2,500 into your business account (necessary social capital for an OÜ company). Starting in 2019, this is enough to register the share capital of your company.

Its main disadvantage with respect to Wise is the price. The basic plan from Revolut Business (valid for businesses up to £100k in yearly revenue) is 25€ per month. In return, you get the benefits of a multi-currency account for your business (allowing you to receive money and send money in a multitude of currencies), a MasterCard debit card, and its premium app experience.

Payoneer

Payoneer

Payoneer is another solution that may be better suited for non-European e-Residents. It provides cross-border transactions in 200 countries and territories and more than 150 local currencies, with its cross border wire transfers, online payments, and refillable debit card services.

It allows you to open local bank accounts in multiple currencies. They also have a service for requesting payments to your customers, and easy ways of paying to your providers. If you can’t open accounts in solutions such as Revolut because you don’t live in Europe, Payoneer may be an interesting alternative.

Paysera

Paysera

Paysera is another of the latest contenders to enter the banking arena for e-Residents. Their offer is quite interesting. They grant an IBAN with which you can transfer money in multiple different currencies around the world.

Some of the cool features of Paysera include:

  • Unlimited and free instant transfers in euros, 24/7, throughout the year. International transfers around the world at attractive prices.
  • Real-time currency exchange at fairly affordable rates to 30 different currencies.
  • A contactless payment card for secure payments
  • A pretty modern mobile app.

It is a good option to consider also in case Wise or Revolut are not suitable for your business model, since Paysera is a much more flexible banking solution.

LeoPay

LeoPay

LeoPay (initially LeuPay) offers a multi-user, multi-currency account. They currently support Euros, US dollars, British pounds, Swiss francs, Romania, Croatia, Bulgaria, Poland, the Czech Republic currencies, and the Japanese Yen.

An interesting differential factor is that they offer two free VISA cards in their basic plan, without monthly fees. In addition, you can order one of them for one specific currency (say: Euros) and another for another currency (example: dollars). That is quite interesting for digital nomads.

To open an account with them, you must be a resident in one of the 60 countries listed here.

Please note: although there are no monthly fees (unlike services such as Revolut Business), LeoPay applies quite steep fees for most banking operations you may perform on a daily basis. This includes transfers, receiving money from local accounts, or paying your providers. These fees can end up being higher than the monthly fee you would pay using Revolut Business, if your company has many transfers per month.

For example, a transfer to a bank account in Europe (SEPA) has a fee of 3€. That means that if you make 10 transfers in Europe per month (which is a very modest number) you will end up paying € 30 that month. In comparison, Revolut charges only 25€ per month if your revenue is less than £100k.

So we recommend that, before considering LeoPay, you take a look at their fees, and do your math.

And the Oscar goes to…

The best option today is Wise. Another solid option is Revolut Business if the members of the company live in Europe. Finally, if none of those options work for you, Payoneer is one of the most versatile when it comes to accepting clients that other banking solutions reject.

New banking solutions are appearing every day, and nothing prevents your company for having more than one account in multiple banks.

Conclusion

In this article, we compare some digital banking solutions for your Estonian company. As a customer of Companio (formerly Your Company In Estonia), we will guide you through the process of opening your bank account and offer you the best alternatives for your business. Interested in launching your online European business with zero hassle? Contact us!