The payments market
The payments market consists of settlement systems for payments and securities, and means of payment.
Developing the payment market is a responsibility of Eesti Pank. The payments market consists of payment and settlement systems and means of payment. Monetary payments are made in the payment systems and securities transactions in the securities settlement systems, while means of payment covers ways that payments can be initiated.
The Estonian payment market
How many of us still remember the days when you actually had to go to a bank or to the electricity company to pay your electricity bill? Or when you could only pay with cash in a shop? But in fact this was only 25 years ago. As technology has developed, so electronic banking has moved forward so fast that today paying by card or using online banking is as commonplace for us as using the telephone or public transport, and fewer than one in ten of the Estonian population remain dedicated users of cash. The payments market is continually developing further though, and in recent years there have been several important changes and advances:
SEPA
In 2014 Estonia became a member of the Single Euro Payments Area (SEPA), which essentially allows payments to be made internationally at the same speed and for the same price as they are domestically.
E-state. E-payment recipients. E-invoices
The Estonian state mainly manages financial matters with its own citizens through e-channels. State benefits and subsidies and pensions are mainly paid direct to bank accounts. Everyday banking has moved onto the internet and people go to their local bank office much less often. It has even been possible for some time now to get a new bank card or apply for a loan without moving away from the computer at home. Since 2017 it has even been possible to open a bank account using a video link and without actually going into the bank office.
One important initiative by the state has been to transition away from expensive and time-consuming paper and PDF invoices to e-invoices. The Estonian state is quite advanced in this because the public sector refuses to accept anything that is not an e-invoice. Anybody can order e-invoice standing orders to make regular payments and save themselves having to remember payment deadlines each month and avoid their inbox being full of payment reminders.
Contactless payments
Contactless bank cards started to be issued in Estonia in 2016. At first they could be used for payments of up to 10 euros, but now payments of up to 50 euros can be made without inserting the card into the PIN payment terminal. Larger payments even than that can be made without entering a PIN by using smart devices like watches or telephones.
Instant payments
The first Estonian banks joined the instant payment system in 2018. By now it seems perfectly natural for transfers to be made between different banks within seconds, day or night, every day of the year. For the clients of banks that have joined the instant payment system, this means that whether the payment is within a bank or between banks no longer makes any difference to the speed that the money is transferred at. The banks cannot rest on their laurels though, because solutions based on instant payments are already being developed that will add further options for payment on top of cards and cash.
Open banking
Open banking is widening the set of providers of financial services and allows banks to share financial information securely and with client consent in order to allow clients more choices. Open banking is creating new services, such as account information services and payment initiation services. Account information services allow clients to use the website of their online bank or other payment service provider, such as FinTech companies and payment intermediaries, to see accounts in other banks, so that they can quickly and easily get a total picture of all their spending and the state of their accounts. Payment initiation services allow clients to start a payment in an online store directly from their bank account without using a credit or debit card or a bank link.
The instant movement of invoices and money requires payment and settlement systems to work together smoothly and without interruption.
Some payment services are also provided by payment institutions, but the volume of payments that they intermediate is very small next to those of the credit institutions.
