Estonia reimagines the digital economy with real-time solutions
By Yogesh Hirdaramani
The Estonian government is aiming to drive digital transformation in the country’s economy with its real-time economy initiative, shares Estonia’s Ministry of Economic Affairs and Communications’ Head of Real-Time Economy Team, Viktoria Bõstrjak-Butorina.
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Estonia's Real Time Economy Team is driving real-time initiatives to transform the country's economy. Image: Viktoria Bõstrjak-Butorina
Despite its tiny size, Estonia boasts some of the world’s most well-known tech startups. For over two decades, homegrown Skype was synonymous with videocalls. Today, Wise is a major digital payments player across the world and one of the top ten fastest growing fintech startups of 2023 according to Fintech Magazine.
However, the small country only has around 149,000 enterprises – many of which are far less tech savvy. Estonia’s Ministry of Economic Affairs and Communications’ Head of Real-Time Economy Team, Viktoria Bõstrjak-Butorina, shares with GovInsider that 99.8 per cent of Estonian businesses are small and medium enterprises (SMEs), with 99 per cent of those having less than 10 employees.
“Small companies do not have a lot of financial resources to invest in IT systems. Some of them are still doing their business on paper or different Excel sheets spread everywhere,” she says. This wastes time, resources, and money for entrepreneurs, who have to manually keep track of all their transactions across a variety of systems.
As a result, Estonia’s economy is far less digital than one would imagine – many still rely on paper or PDF invoices, for instance. Even though nearly 100 per cent of citizen-facing services in the European country are digital, the landscape is markedly different for the businesses.
This is why her team is hard at work pioneering a new vision for Estonia’s digital economy: the real-time economy, where all routine processes run automatically in the background and businesses can exchange information with structured and machine-readable data.
Routine operations, to the back
The real-time economy refers to a digital ecosystem where all transactions happen in real-time in the background, shares Bõstrjak-Butorina, freeing entrepreneurs to focus on core business activities instead.
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For instance, the real-time economy team has introduced an e-invoicing system that eliminates the needs for businesses to send each other email invoices. Instead, businesses that have onboarded on the common e-invoice system can send and receive e-invoices automatically. Beyond e-invoices, other solutions include e-receipts and e-consignment notes.
The same data can go to tax authorities automatically. This reduces the administrative burden for businesses to file tax reports and increases transparency between businesses and governments, she explains.
A study from 2020 found that shifting to the real-time economy would save more than 14 million working hours for Estonians and save the government as much as 200 million Euros a year, as well as reduce greenhouse gas emissions by more than 28 thousand tons a year.
To make this happen, businesses require an automated data exchange layer and common and standardised data formats. This is where Estonia’s public sector is stepping in to set the direction.
Data-based reporting
The agency is working on an initiative to review and simplify business data reporting as well as eliminate unnecessary fields. She explains that in total, entrepreneurs in Estonia must currently file more than 400 reports – some monthly, and others annually.
This is why the team has initiated a cross-agency steering group consisting of 20 agencies to develop a unified data taxonomy so that all reports are data-driven and standardised. The group is collaborating with the private sector to ensure that the new taxonomy is appropriate for businesses and accounting software providers.
To simplify reporting, the team previously introduced an initiative titled, “Reporting 3.0”, in partnership with the Estonian Tax and Customs Board, Statistics Estonia and the Bank of Estonia. Before the programme, businesses had to fill in over 400 fields when filing workforce reports.
“Is it really necessary that we ask for all this information?” she asks. Thanks to the now completed revamp, they have successfully reduced the fields to only 32 fields.
Systems that talk to each other
By standardising common data formats, such as invoices, bills, orders, and receipts, various stakeholders can integrate systems together and collectively create better data, she shares.
The agency is supporting integration by building common infrastructure and technical rules that private sector tech developers, businesses, and vendors can use to better integrate with each other.
First, this will help companies gather data more quickly when filing reports – some businesses spend two to three weeks gather all the data necessary for filing, she shares. Harmonising data standards on a common platform can simplify this process.
Next, this makes it easier for companies to share data with each other. When businesses use the same standards, they can tap on APIs and sharing protocols to exchange data, create common data spaces, and build additional services from shared data. The country is well known for its data sharing platform, X-Tee, which enables organisations to share data securely with each other.
GovInsider previously reported on how organisations are using privacy-enhancing technologies to share data and create new services.
Providing value-added services
Finally, the real-time economy will enable the government and private sector players to provide additional value-added services.
Currently, around 10 per cent of businesses are already using the e-invoicing system. Now, the agency is in the midst of developing a Company Viability Index (CVI), which businesses can use to compare their performance against similar businesses and understand how the company is doing financially.
The index could also incorporate AI tools to provide recommendations – after all, good data means better AI, she notes.
Currently, the e-invoicing system is more popular amongst larger companies which have more reports to file. The team hopes that access to these additional services will motivate smaller companies to onboard onto this common infrastructure.
They are also running webinars, trainings, and workshops to raise awareness of the real-time economy initiative to Estonian businesses.
Looking ahead, the team also aims to introduce a digital gateway that entrepreneurs can tap on to view all services relevant to them and their obligations as well as a sustainability reporting tool, she shares.
To read more about GovInsider's coverage of Estonia's digital development, click here.