e-Estonia: How Estonia is digitalizing an entire country

Complete your tax returns in three minutes. Visit the DMV from your couch. Vote with your iPhone on your way to work. Free nationwide wifi. Utopia? No, this is Estonia.

“How do you attract foreign investment? … You get more customers! We only have 1.3m Estonians … we need more people … even if there’s an immigrant that wants to come to this shitty weather place called Estonia, they’ll most likely go to Sweden … but why should that mean you can’t be Estonian?”
– Taavi Kotka, Estonia Government CIO [1]

Welcome to Estonia – a country where internet access has legally been a human right since 2000 [2]. A small country in the Baltics twice the size of New Jersey, “e-Estonia” has for over a decade moved the country towards full digitization of its government services. Today, Estonians can file their tax returns online in three minutes, select daycare, and even vote for their next president online [2]. In 2014, Estonia sought to share these services by opening its borders to all citizens of the world to apply for an “e-Residency”.

Source: Digital Nomads Documentary “One Way Ticket” [1]

How it works

Every Estonian is offered a physical personal digital ID-card with a chip and a mobile app ID. When logging onto a government service online, the user registers with the card or app, and is then asked two distinct pin-codes to verify his/her identity. As an example, see how the 36-year-old tech-savvy Estonian prime minister logged into the system to place his vote in the election:

Source: Eesti Reformierakond “Prime Minister of Estonia explains how fast, simple and safe is e-voting” [3]

The Estonians have found a clever way of integrating all citizen databases, so that they connect to each person’s ID.  This enables the prime minister’s “Only ask me once” principle: “if the government has already asked me once that I have a daughter that information should link to all my tax returns, everything” [5]. When the tax return needs to be filed online, it is already pre-filled with your salary, deductible bank loan interest, etc. To ensure data security, both state authorities and agencies connect data through a decentralized system dubbed the “X-Road” wherein there’s no single owner or controller [4].

e-Estonians: Making the three minute tax return possible

The move towards an e-State has resulted in plenty of material benefits for the Estonian. Here are a few of my favorites [2]:

  • e-Tax: After having logged onto the system, the user reviews their pre-filled forms, makes any necessary changes, and approves the document with a digital signature. The process typically takes three to five minutes.
  • i-Voting: Allows voters to cast their ballots from any internet-connected device, anywhere in the world.
  • Electronic Health Record and e-Prescription: Each patient has one single common record integrated and accessible across all hospitals, including image files such as X-rays. Prescriptions are done with a click. At the pharmacy the patient presents the ID card; any insurance subsidies are applied automatically. For routine fills, no doctor visits are needed – the patient can contact the doctor by e-mail or phone.
  • e-Police: A mobile workstation in every patrol car gives officers instantaneous access to check on a driver – their motor vehicle registration, insurance, population register on demographics, and weapons register. Before, this process took 20 minutes over radio and is now done in 2 seconds.

The e-Residency: Become an Estonian in just a few minutes

If you want to start a company, Estonia should be on your shortlist. While the “e-Residency” doesn’t grant you rights to live in Estonia, to travel, or gain citizen benefits, it allows you to access several of the services provided to Estonians. Applicants can obtain a digital ID that will let them register their business in Estonia, open a bank account, use the e-tax service, and digitally sign contracts anywhere in the world.

While the jury is still out on the succes of the e-Residency, Estonians themselves have benefitted hugely from the digital transformation of their country: dramatically reduced bureaucracy, more citizens to file correct/higher taxes (increasing tax revenues), and improved efficiency in notoriously cost heavy sectors such as health care.

What’s next?

While the new digital world has been able to cut a lot of red tape, two concerns remain. First, anyone with an internet connection could hack the system and affect Estonia’s elections, access personal health information, and police records. How will Estonia ensure a 110% secure data environment? Second, the administrative work replaced by the digital world was providing jobs to the economy. For a country seeking to imitate Estonia’s success, how should it think about the replacement of this work force?

(729 words)



Picture credit: http://www.borderlessblog.com/estonian-e-residency/

[1] Digital Nomads Documentary: One Way Ticket (https://www.youtube.com/watch?v=y4zEFYzhVfI)

[2] e-Estonia website (https://e-estonia.com/)

[3] Eesti Reformierakond: “Prime Minister of Estonia explains how fast, simple and safe is e-voting” (https://youtu.be/yZ4s95lFkk4)

[4] e-Estonia website, X-Road page (https://e-estonia.com/component/x-road/)

[5] The Daily Show with Trevor Noah – Exclusive Taavi Roivas interview pt. 1 March 22, 2016 (http://www.cc.com/video-clips/bz2f5k/the-daily-show-with-trevor-noah-exclusive—taavi-roivas-extended-interview-pt–1)


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Student comments on e-Estonia: How Estonia is digitalizing an entire country

  1. Love the article! What do you believe is the impact of size here? Maybe it is important that Estonia has barely 1.3m people, which might make the implementation easier. Another factor that contributed to the successful implementation was the independence from Russia and hence the fact that Estonia and its bureaucracy had to be rebuilt from scratch. It is easier to rebuild than to change an existing bureaucracy.

    I highly doubt that bigger countries will be able to replicate any time soon and I believe your point towards jobs will be decisive here. Resistance will be high as entire governmental departments will get closed down. So let’s see whether the digital government will disrupt the paper version.

  2. Interesting article. Like what Donald Duck said, I think size of the country has been an important factor in how they were able to make it happen. But as you have said, it would be interesting to see if other countries benchmark Estonia in their quest for digitizing government services.

    Also, in your research about the topic, were you able to find some numbers on the impact of this digitization to the country’s economy and social metrics? (Roughly GDP and/or Citizen Satisfaction Rating) I think this can give a good understanding of the benefits of this system and could help answer your question on job reduction and whether of not this is worth it.

    1. Hi JASP – thank you for your comment, and great questions.

      Re the impact: Estonian officials say that the move towards a paperless society is saving Estonia 2% of GDP (https://e-estonia.com/facts/). Given that this is recurring savings, the digitization seems like rather lucrative move.

      According to the World Bank, “over 14,000 new companies registered in Estonia in 2011, 40% more than during the same period in 2008. High-tech industries now account for about 15% of GDP” (http://www.economist.com/blogs/economist-explains/2013/07/economist-explains-21).

      The digitization has also been a big benefit to the police: “Since the introduction of e-Police, Estonian police have: handled 70% more offense reports per day, decreased road fatalities by over 400%, performed look-ups on 10x more vehicles per month” (https://e-estonia.com/component/e-police/).

      I have, however, not been able to find much information on what Estonia did to transition it’s work force. I look forward to dig a bit more into this – indeed an interesting question.

  3. This is fascinating! I particularly think the “only ask me once” policy is important. Estonia seems to me making huge leaps in Government efficiency, which will eventually allow it to cut down on spending. I am also pleasantly surprised to read that the Government has made internet a right since 2000, when internet was nowhere near as pervasive and accessible as it is today.

    A few questions come to mind. First, how does the Government pay for this? Estonia is not an incredibly wealthy country and while I believe this initiative will save cost in the long-run, it surely was a large upfront investment. Second, what sort of measures is the Government taking to promote technology education? There needs to be a base understanding and access in order to have an initiative such as this benefit an entire population. Finally, how do they secure such a vast network and make it safe for all users? Do users fear a potential violation of their privacy? Could the entire database of all Estonians be hacked by tapping into this one network?

  4. Fascinating article. Kudos to Estonia for effectively digitizing so many of these otherwise archaic government functions. The feat that impresses me the most, though, is the government’s ability to aggregate information about its citizens from disparate systems so that citizens never have to provide the government the same information twice. The logistics associated with that accomplishment must have been an extreme challenge, not to mention the cross collaboration that was required by multiple parties. It would be interesting to learn how they performed all this work – was it done internally or was any of it outsourced to third party software developers?

    Additionally, as others have echoed, how much did Estonia’s size lend to the success in its digital transformation? The thought of a large country like the U.S. implementing similar digital initiatives is impossible to conceive. I must hold on to some hope, though!

  5. So interesting! Never knew about e-stonia. I agree that security is likely the largest concern with their digitized world. I believe that this model of voting, doctors appointments, taxes, etc, is likely the way of the future, but I do not know if there are enough secure measures in place to make this a viable system for all countries today. I also wonder about the capital investment required to digitize. This may have been possible for Estonia specifically because it is SO small. In a country like the United States the scale of the conversion of regulatory bodies to this type of system would be massive. I hope we get there, but I am not sure how far away it will be!

  6. Wow, I want to live in Estonia! Their digital programs seem to provide very efficient governmental services, something of an oxymoron in the United States. I was most fascinated by their electronic health record system that provides medical information for each citizen no matter where they receive care in the country. I think such a system can create dramatic efficiencies in healthcare and could lead to better care for all. I wonder though, to what extent this program is possible because the government of Estonia directly pays for the care of all citizens. It seems relatively straightforward to create this system when a single party is in control of providing access to healthcare. However, I think it would be harder to create such a system in the US, where so many public and private organizations coordinate, provide, and pay for care. What’s more, many of these parties would likely be disincentivized to help create a universal health information system–for instance, an insurance company with a high proportion of healthy (and cheap) patients might invite significant competition from other insurers if their patient’s health information was readily accessible to all. Nonetheless, I believe that Estonia’s EHR system is definitely the way of the future. It is interesting to note that other large countries, like France, have experimented with IT systems to aggregate healthcare information for their citizens. Their “Carte Vitale” system currently provides health insurance information for all patients in the country, but small pieces of actual medical information are being added to the database–things like vital signs and prescription information. It will be interesting to see how their system develops over time. The French (and Estonian) experiences could inform a feasible path forward for the US.

  7. Great post! A few thoughts, some of which echo previous posters.
    – Data security is a huge issue here. You mention the “X-Road” as the way that they can protect data, but how is the system actually implemented? What kinds of authentication features does the system have? Though decentralized systems could be more secure, there are plenty of stories of data theft even in these supposedly secure arrangements (e.g., Mt. Gox hacking of Bitcoins).
    – Implementation in larger countries may be more difficult, but not impossible. For example, in the US everyone who is registered legally has a social security number – that SSN could become the one “username” that individuals use to log in to a variety of websites. Since financial information, medical information, and legal information are all tied in some way to SSN, it could be a great way to bring together a digital portal for each resident of the US. But the investment will be significant and it will require digitizing a lot of paper – curious how Estonia was able to transition from paper / manual records to digital ones, and if there are lessons to be learned.

  8. Very cool article. It’s very helpful for Estonia to set an example as a small trailblazing country. Their experience in integrating citizen records, including in their healthcare system, helps demonstrate what could be possible if other countries follow their lead. In the trade data space, the United States has been able to apply Estonia’s “Only Ask Once” principle through the International Trade Data System. Instead of 200+ paper forms collected by over 40 different federal agencies, exporters and importers now only have to file trade data once through a single online portal, significantly accelerating the trade declaration process. However, even with this success there is still a cautionary tale – it took over a decade to complete the regulatory and IT work necessary to eliminate the original forms and streamline them into one data collection. Sadly, in a large country like the United States, replicating Estonia’s model is no easy task.

  9. This is an excellent post. When I was at the City of New York, we pointed to Estonia as the gold standard for digital government. But our envy was always measured because Estonia was at a huge advantage — they built new system from scratch, whereas in NYC we are trying to upgrade an analog operating model for the digital age. (playbook.cityofnewyork.us is our work to transform the digital experience for New Yorkers and become more like Estonia!). One common issue we faced in NYC (and would exists anywhere with a federalist system of government) is in having total control and influence over changing the method and mechanisms for service delivery. This “regulatory moshpit” is why the City of New York hasn’t been able to enact online voting, for example. I would be curious to know if Estonia has encountered and overcome similar issues, particularly with regards to incorporating technology and data collection into existing service delivery.

  10. Thanks for bringing to my attention such an incredibly innovative and forward looking example of government. Many countries (and the US is a particularly bad offender having recently relocated here) struggle with slow, paper based bureaucracy. Estonia proves that this no longer needs to be the case in 2016. I hope other countries are inspired to adopt some of the same actions that Estonia has towards digitizing interactions between the state and its citizens.

  11. “Utopia? No, this is Estonia.” Love this. With technology advancing and globalization in full force, the traditional notion of “border” and “country” is breaking down. As you rightly brought up, digitization carries risks that must be mitigated for the system to work. Something interesting I read recently pertains to chain-block technology, where a distributed database that maintains a continuously-growing list of block records. This mechanism has shown to be resilient to tampering by hackers and may be the solution to transforming paper currency into digital currency?

  12. Very interesting post, Nicklas! I’m going to complete my e-Residency for Estonia as soon as I finish this post! e-Residency is certainly an innovative initiative by the Estonian government to attract foreign investments. However, I think foreign investment market is a hugely competitive landscape where there exists a major player like Canada who doesn’t only provide ease of doing business in the country, but also a pathway to citizenship and an access to top class education. I do believe that Estonian would need to step up their incentives and offerings beyond merely digitized banking, business registration and tax services in order to effectively lure foreign investors to the country.

  13. This is a brilliant direction for a country to take. Sure, as the previous comments have suggested, the size of the population has been a driving force in nation-wide adoption and implementation of this e-form of government, but let’s not take anything away from what has been achieved. There is no doubt that this is the right direction and needs to be adopted across the globe. From a citizen’s perspective, the amount of time saved and ease and intuitiveness of use is brilliant. For the government, it is a direct access to data from and of its people. Furthermore, data analytics would help in governance. I can see a lot of possibilities for this model in developing countries where bureaucracy is akin to a stone wall and corruption is rampant. The e-residency program is also a breakthrough in investment promotion. Like Nicklas replied in the comments, positive effects of such a program are already visible, and in a time where ease of business is the driving force behind investments, it will reap more and more benefits as the program is expanded. Kudos Estonia.

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