You can track down nearly everything your heart desires these days in hip, cutting-edge Tallinn, from posh nightclubs to yachting centers to computerized bowling alleys. But, especially if you’re a first-time visitor, there’s one thing you may search far and wide for in vain : a bank.
That’s because banks or, to be more precise, bank buildings, have closed by the hundreds because of an explosion in Internet banking. At least here, physical branches have become increasingly obsolete.
The number of regular Internet bank clients has skyrocketed from zero in 1997 to half the 1.4 million population today.
Nearly all businesses, from one-man shops to utilities, also carry out virtually all their transactions exclusively through cyberspace. Ask Estonians under 30 to compare Internet banking with traditional methods and most would be at a loss—having only ever known the former.
But the embrace of online banking is just one example of the Internet prowess of Estonia, widely regarded as having the most advanced IT infrastructure of any former communist state.
Estonia ranked No. 8 out of 82 countries in putting the Net to practical use in a recent report by the World Economic Forum, outdone only by tech heavies like Finland and Sweden. In Internet banking and e-government, it rated No. 2 and 3.
It’s been in the vanguard in other ways.
The government several years ago set up a site called Täna Otsustan Mina, or Today, I’m Deciding, where citizens can comment on pending bills or even submit draft legislation of their own. Visitors to the site, which is monitored by a webmaster in the prime minister’s office, recently suggested marijuana be legalized. Officials, unsurprisingly, didn’t consider that idea.
One suggestion posted on the site that did become law called for an easing of restrictions on carrying swords in public. Student fraternities, who use ceremonial swords in rituals, proposed the change and left hundreds of online messages to persuade the government to act.
The country’s technological progress is all the more impressive given where it started, in the technological Stone Age, when it shook off Soviet rule in 1991.
In those days, most residents didn’t even own a phone, a scarcity item in Soviet days. And you could count the number of modern PCs in the country on two hands.
But that relative backwardness proved to be a blessing in disguise, as Estonia had no choice but to leapfrog older technologies and install the latest and the best on offer.
“We had to build everything from scratch here, from commercial banks to the Internet,” said Linnar Viik, who advised successive governments about the Internet. “Building from scratch is easier than reshaping existing structures. Existing rules and bureaucratic norms are usually the bottlenecks, and we didn’t have them here.”
Many Estonians who now have mobile phones never had a landline phone. And most who now use the Internet daily to pay bills have never seen a Western-style check book, and wouldn’t know what to do with it if they did.
Today, 70 percent of Estonians own mobile phones, 20 percentage points higher than in the United States. Some 40 percent of Estonians have a computer with online access in their home; in business, online access is over 80 percent.
Wireless Internet access is also widespread, from Tallinn’s Town Hall Square to office building canteens. There are 200 such wireless zones across Estonia, the highest per capita concentration of so called WIFI areas in Europe.
A flood of investors from Nordic countries, who now own all of Estonia’s banks, most of its media and scores of other leading companies—also helped. Finland, home of mobile phone maker Nokia Corp., is Estonia’s largest foreign investor.
“When the bulk of investors coming to your country already see the Internet as a fundamental aspect of doing business, that culture becomes ingrained, and it snowballs,” said Viik.
Others put the Internet progress down to Estonians’ famously taciturn but curious nature.
“If a Frenchman loves to sip wine with his friends and a German enjoys his beer,” explained one communications executive, “then an Estonian likes to sit behind his computer on a dark evening, surfing the Net and at the same time talking on his mobile phone.”
The government has played a central role.
It declared that its aim was to make the Internet available to everyone and it followed that pledge by setting up 500 public computer centers in cities and towns across the sparsely populated country.
The centers, marked by blue-colored @ road signs, are found in cities but also on tiny windswept islands or in desolate forests in converted barns.
The government’s also led by example.
All Cabinet sessions, for instance, are held online, with leaders huddled over screens and making comments through their PCs, as traveling ministers log on from abroad. When the Cabinet approves some policy or bill, the decision is posted almost instantaneously on the government’s site.
“All these ministers sit there with no papers in front of them, most coming into the room with no documents, not even briefcases,” explained Daniel Vaarik, a recent government spokesman.
If ministers oppose a law, they type in their reservations on the computer screen for colleagues to see. If no one is opposed, the prime minister calls for unanimous consent and moves on, drastically cutting down on chat.
“Cabinet meetings used to take between four and 12 hours,” added Tex Vertmann, the state webmaster who sits in on the sessions. “Today, they take between 10 minutes and an hour.”
Emphasizing Estonia’s homegrown know-how, the e-government uses a program called VIIS that was specially developed by the Tallinn-based Microlink.
Former Prime Minister Mart Laar, who launched the system in 2000, dubbed the Cabinet room the “Starship Enterprise” because of its high tech feel—with some 20 sleek computers set atop a horse-shoe shaped conference table. Windows in the spartan room, with not a file cabinet in sight, look out over the cobblestone streets of Tallinn’s 13th century old town.
Visiting EU leaders expressed admiration for the e-Cabinet, saying they could employ it in the 25-member EU, according to Vaarik.
“They said it could make their own deliberations more efficient, and might save them from having to listen to 25 speeches every time the countries get together for talks,” he said.
Not everyone’s equally impressed.
Some critics say the e-Cabinet, with all its bells and whistles, is an overpriced showcase primarily designed to impress visiting VIPs. Still others complain that it only creates the illusion of a forward-thinking, participatory democracy but that Estonia’s remains as cliquish and inefficient as any.
Officials concede that the full practical benefits of e-government will only accrue after the system develops further.
But they insist many benefits are already apparent, pointing out that the government saves as much as 200,000 dollars a year in paper and copying costs alone by storing and distributing documents electronically.
Businesses report similar savings.
Serving a bank customer via the Net and ATM cash machines, for instance, costs three or four times less than grappling with the same person in a walk-in branch.
Banks say they’re not stopping there, either.
Several recently began advertising a service where clients can use a mobile phone as a de facto credit card, paying at restaurants, hotels and gas stations by instantly accessing their Internet bank account.
For traditional banking in Estonia—it’s just another nail in the coffin.