Overview: Creditinfo Estonia’s Payment Default Registry in 2023
Creditinfo Estonia’s Payment Default Register was established in 2001 by Estonian banks, being the largest and oldest register in Estonia that gathers consistent and high-quality debt information. The register of payment defaults helps Estonian entrepreneurs make the right credit decisions and enables the application of the principle of responsible lending.
The largest contributors of payment defaults continue to be from the financial sector
In 2023, a total of over 700 companies entered payment defaults in the register. The TOP entrants by activity were:
- Credit institutions
- Financial service providers
- Collection service providers
- Telecom companies
During the entire year, more than 100,000 new payment defaults were added to the register by companies, of which 91% were private payment defaults. Payment defaults of legal entities were published in a total of nearly 9,200 cases.
There are tens of thousands of people with payment defaults in Estonia
As of the end of 2023, there were nearly 57,000 individuals with active payment defaults.
During the liquidation of the debt, the current default is marked as closed – in 2023, there were 111,000 private individuals with a closed payment default. A closed payment default indicates that the debt has been paid, but at the same time it warns the creditor that the person has had problems paying bills in the past and this allows for a more accurate assessment of his creditworthiness. NB! In the case of private individuals, closed payment defaults are published for up to 5 years after the payment default has ended.
As of the end of 2023, there were almost 20,000 legal entities or companies-institutions with active payment defaults.
There were nearly 33,000 legal entities with closed payment defaults. NB! In the case of companies, the information provided will be published for another 7 years after the end of the default.
There are more than 150 thousand active payment defaults in the register
By the end of 2023, there were nearly 130,000 active payment defaults in the Payment Default Register by individuals with payment defaults. The average payment default amount, or debt, of a private person is €2,514. There were almost 363,000 private individuals with payment defaults that were closed.
At the end of 2023, there were approximately 40,000 active defaults of legal entities. There were almost 65,000 closed defaults of legal entities.
The number of valid payment defaults has increased
In total, there were nearly 171,000 active payment defaults published in the Payment Default Register. If we add to this the information on payment defaults in the closed and disputed status, the total number of payment defaults in the Payment Default Register is 600,697, which has increased by approx. 9% compared to 2022.
At the same time, the effectiveness of the Payment Failure Register is maintained. Of all payment defaults that have reached publication, one in four, or 26%, is paid immediately within the first month, and half (47%) within the first three months after publication.
The disclosure has the greatest impact on the debts of the financial sector – 36% of all defaults disclosed by banks and leasing companies are paid already within the first month and almost 63% within the first three months.
Visit www.creditinfo.ee for more information.
Creditinfo Estonia’s sanctions’ monitoring solution for small businesses
With the ongoing aggression initiated by the Russian Federation in Ukraine, the need to implement international sanctions has to be embedded in the daily business activities of our companies.
We know that companies – operating in the fields of activity subject to such a special obligation – must do more due diligence to mitigate the risks associated with implementing sanctions, but the processes should be somewhat similar to all of the companies operating in Estonia.
Such companies, whose daily economic activities do not deal with continuous customer background research or transaction monitoring, can sometimes be in a difficult situation where they do not have enough know-how or manpower resources to assess the risk of whether one of their customers or partners falls under the established restrictions or not.
Finding such a necessary workforce is always possible, but as you know, making such a fixed cost can sometimes be impossible according to the company’s business model. In this case, one of the options is to delegate the control of said risks outside the company or to use convenient and straightforward, but at the same time reliable services to help with this task, which are available on the market.
For these cases, Creditinfo is offering small businesses the opportunity to mitigate their risks in two ways – by delegating the checking of compliance with sanction lists for their customers and partners entirely to us or by using a straightforward and convenient solution on our e-Krediidiinfo portal – WebScreening.
The web-based service WebScreening allows you to request the entry of a person of interest to you through a convenient and comprehensive user interface, both on international sanctions (European Union and the United Nations) and watch lists (so-called local sanctions and “black lists” of various countries, in some instances, for example, wanted persons) as well as persons with a national background ( PEP) from the lists.
With additional functions, it is possible to perform user management in the portal (if the company has more than one user) or view the archive of requests made. At this point, it is good to note that the archive of performed requests is convenient to use, for example, to check the performance of the employee’s duties and prove the requests made to the supervisory authority, if necessary.
Check out the service: www.creditinfo.ee/kyc
An excellent Account Information Service is based on the accuracy of the categorization of transactions
In 2021, Creditinfo Estonia received permission from the Financial Supervision Authority to start offering account information services in Estonia, which later expanded to the markets of Latvia and Lithuania. Today, we have been offering the account information service on the market for almost two years. The account information service is based on the PSD2 directive. We have access to the transaction data of customers of banks and financial institutions using a secure data transmission channel and customer consent.
Account information categorization is the first and most trivial account data processing that creates customer value. In addition to the primary value, categorization is also an input for all subsequent, significantly more value-creating services (for example, debt risk assessment). Without categorization, each time finding, analyzing and displaying value from account information becomes too resource-intensive, so the end user would have to wait a relatively long time to get a result from their data.
Unfortunately, categorization is worthless if the accuracy and quality of the categories are low. Of course, every transaction on a bank account is not an input for assessing a person’s credit risk. When determining credit risk, it is critically important that the accuracy of the categorization of transactions required for analysis is as high as possible. This is to prevent credit losses for companies and overdue debts for private individuals, directly affecting both interest groups’ reputations.
The main input from categorization is related to income
Visit creditinfo.ee/en for more information.
Ivo Vallau
Open Banking Product Manager, Ceditinfo Estonia.
A Master’s Thesis that highlighted the importance of timely submission of the Annual Report
In May 2023, Creditinfo Eesti announced a prize fund to recognize students who have addressed research questions in the fields of money laundering and sanctions in their research. In cooperation with the COBALT law firm and the representatives of the State Money Laundering Bureau, the evaluation committee chose Victoria Helenurme, a master’s student from the University of Tartu, as the winner for her master’s thesis on the topic “Prediction of deletion from the business register due to non-submission of the annual financial report using the example of Estonian companies”.
Victoria Helenurm is from Tallinn and graduated cum laude from the University of Tartu, majoring in Marketing & Financial Management. Today, she works as a financial controller in a company offering energy-saving indoor climate and renewable energy solutions and sees her future in business.
We had an interview with her on the journey of her thesis topic:
The topic of your thesis was “Prediction of deletion from the business register due to non-submission of the annual financial report using the example of Estonian companies” – how did you arrive at this topic?
At the beginning of the summer of 2022, discussions began with people who eventually became my thesis supervisors. My main desire was to write a paper on a current topic in society. This year, the Estonian state penalties for not submitting the annual report became harsher, and in cooperation with my supervisors, we saw that there is a public interest in this area of research and also sufficient data for research.
Why was this topic worth researching?
If, as a person, we take a loan, for example, we are understanding the obligations that come with taking a loan. For me, founding a company or being on its board is a somewhat similar responsibility – as a manager, we have assumed the responsibility, among other things, to report on the progress of our company’s business to the public.
Unfortunately, while we are mostly exemplary in servicing loans, tens of thousands of Estonian companies fail to submit their annual reports on time.
I cannot say whether this difference is due to, among other things, the fact that the penalties for not submitting the annual report have been relatively lenient. But it is certainly worthwhile for us to become more aware that such behavior is problematic.
After all the state of our countries businesses is based largely according to the data of the Business Register. If we have thousands of active companies that do not fulfill their reporting obligations, the financial forecasts, risk analyses, business decisions, etc. of the state, lenders and other parties will suffer in its quality.
The submission deadline (6 months after the end of the financial year) is a very lenient deadline. The business landscape is more and more unpredictable, so the knowledge of the previous year’s business results that arrives half a year later is already outdated. As is typical of our e-government, we would expect that at least certain types of companies could be assigned a much earlier submission obligation to help update our economic data.
What facts became clearer as part of the research?
In my research, I tried to find an answer to the question of whether the deregistration of a company can be predicted purely by looking at how the company’s management has cared about the obligation to submit an annual report in its previous business life.
The Estonian financial world is very much a believer in financial ratios when assessing the business health of a company. I tried to see if it is possible to convincingly assess the business risk of deleting the company by completely setting aside the financial statement.
The studied dataset also proved this – a significantly more accurate forecasting method than financial ratios (prediction accuracy approx. 63%) was the observation of the past behavior of board members (prediction accuracy almost 82%). It can be said that if there is a member of the board of the company who has either delayed or failed to submit the financial year report in previous companies, it is a very clear business risk, which indicates the risk of deletion of the company in question.
How could this research topic be continued?
Although I myself rather do not plan to continue my studies in a doctoral program, I definitely see possibilities for expanding this research topic. The obtained research results could certainly be compared with our neighboring countries – to assess whether in Latvia, Lithuania, Finland, etc. there are similar relationships between corporate delisting and board members’ past due diligence.
Another immediate opportunity for investigation is provided by the amendments to the law that entered into force this year, which toughened the penalties for failure to submit an annual report, among other things. Repeating this research in 5+ years would give an idea of whether business behavior has improved in terms of reporting obligations.
We were very pleased with Victoria’s research, as her research clearly connected with the general theme of our competition – the data of the Business Register and national registers in general are the main factors when applying the KYC principle. Financial data from the company that is not submitted on time or is completely missing, is a clear danger signal when investigating the background of your business partner.
When it comes to risk management – both when creating a customer relationship and during the existence of a customer relationship, up-to-date data from the business register is very necessary. Does the company actually operate; whether the data there (especially the field of activity and financial data) are correct (especially when it comes to the application of enhanced due diligence measures). The given data helps to understand the customer’s activity profile.
If the client does not submit annual reports, it is clear that it may be a riskier client, and this should be taken into account when establishing or monitoring a business relationship in order to mitigate the risk.
Urmas Pai – KYC&Fraud Global Product Manager, Head of the evaluation committee
Creditinfo Estonia
How are sanctions created? Overview on the example of the European Union
Even if it turns out later in the proceedings that you have behaved correctly, it is in no way reasonable to attract such negative media coverage; as well as experiencing the stress and resource consumption inevitably associated with such procedures. Therefore, it is always wise to prevent problems and look for solutions to mitigate such risks as early as possible, which AS Creditinfo Eesti can always help you with.
However, how are restrictive measures established, who is responsible for the fact that the EU can put someone on its lists at all, and is it inevitable to be on the sanctions lists or is it possible to get out of there somehow? Let’s take a closer look at this process here.
Initiation of sanctions in the European Union
The European Union is an association of independent countries operating on the basis of its founding treaty(s). One of the important principles is that the European Union has a common foreign and security policy, one of the important parts of which is, among other things, the imposition of sanctions in situations where it is desired :
- protect EU values, fundamental interests and security
- keep the peace
- consolidate and support democracy, the rule of law, human rights and the principles of international law
- prevent conflicts and strengthen international security
We have already covered the nature of sanctions and their relevance in relation to the situation in Ukraine in more detail on the Creditinfo channels beforehand, so we would currently only look at the process of how the idea of sanctioning at the EU level results in a mandatory legal act for all persons operating on the territory of the Community.
The creation of legislation necessary for the implementation of sanctions can be viewed at the EU level in three different aspects :
- Legislation to take over UN sanctions is being created
- Legislation is being created to implement UN sanctions in an expanded form
- Legislation to establish autonomous EU sanctions regimes.
The European Foreign Service (institutionally part of the European Union Commission) is responsible for the implementation of EU sanctions policy , whose responsibility is to prepare drafts for establishing or changing sanctions regimes.
Of course, this is done in close cooperation with the member states, for example it is very important to get input regarding the identifying data of sanctioned persons, which information is often available to national specialists, and including it in the legislation establishing the sanction (or its annex) will help to significantly reduce the number of false positive responses arising from the implementation of the legislation in the future.
Since all member states must give their consent to the imposed sanctions, the draft sanctions move to the institution with the member states’ representation, i.e. the Council of the EU. The next instance is therefore the corresponding working group of the Council of the European Union (RELEX) , where the specialists of the member states cooperate to reach an agreement on the text of the legislation.
If agreement is not reached, the agreement will continue in the working group formed by the permanent representatives of the member states at the EU (COREPER) , from there the draft will go to the General Assembly of the Council of the EU (forum of heads of government), where it will be adopted and the text of the legislation will be agreed upon. For mandatory compliance, the legislation will be in the EU gazette after its publication.
Ending sanctions
Existing EU autonomous sanctions legislation is reviewed regularly, but no less often than once every 12 months.
Since the EU follows the principles of the rule of law (Rule of Law), it is of course also possible for persons under sanctions to get rid of the status of a sanctioned person through legal processes.
There are two main options for this – to publish a motivated statement of wish to this effect directly to the Council of the EU, which will then process the corresponding application and make a decision regarding whether to leave the sanctions list or to remove it from it, or another, more widely used option, to turn to the General Court of the European Union ( General Court of the European Union).
For example, at this point it is perhaps even appropriate to bring up the most talked about decision of recent times about the victory achieved by Violetta Prigozhin, the mother of the late Yevgeni Prigozhin, regarding her delisting .
AS Creditinfo Eesti has continued to take on the concern of providing the necessary support to market participants in the implementation of international sanctions, and we are ready to help with various issues, both with advice and force. We believe that in this way, in cooperation with our customers, we can best contribute to the achievement of the common foreign and security policy goals of the EU.
Visit: creditinfo.ee
Retrospective of the semi-annual statistics of the Register of Payment Failures in Estonia
The Payment Default Register managed by Creditinfo Eesti reflects the debts of private individuals and companies and thus helps to make smart credit decisions. It is the first and oldest register containing debt data, which was established in 2001 by Estonian banks.
There are tens of thousands of people with payment defaults in Estonia
As of the end of the first half of 2023, there were 57,694 individuals with valid payment defaults. Compared to the period a year ago, the number decreased a bit.
When the debt is liquidated, the current payment default is marked as closed – at the end of the first half of 2023, there were 109,766 private individuals with closed payment defaults.
A closed default shows that the debt has been paid, but at the same time it gives the creditor a warning that the person has had problems paying bills in the past and it allows for a more accurate assessment of their creditworthiness. In the case of private individuals, closed payment defaults are published for up to 5 years after the payment default has ended.
The number of companies with payment defaults is increasing
As of the end of the first half of 2023, there were 21,121 legal entities or companies-institutions with valid payment defaults. Thus, there has been an increase of 3.3% compared to last year.
There were 32,836 legal entities with closed payment defaults. In the case of companies, the information provided will be published for another 7 years after the closing of the payment default.
There are more than 150 thousand active payment defaults in the Register
There were 128,405 active payment defaults in the Payment Default Register of private individuals at the end of the first half of the year. The closed payment defaults for private individuals with payment defaults reached to 350,120.
There were 44,472 active defaults of legal entities at the end of the first half of the year. There were 65,816 closed defaults of legal entities.
The number of active payment defaults has increased
In total, there were 172,877 active payment defaults published in the Payment Default Register. If one also adds information of closed payment defaults, the total number of payment defaults in the Payment Default Register is 588,832, which has increased by approx. 6.6% compared to the end of 2022.
By Creditinfo Estonia.
Visit: www.creditinfo/ee/en
AS Creditinfo Eesti appoints Elari Tammenurm as new CEO
Estonia, 9th May 2023 – Creditinfo Group, a global service provider for credit information and risk management solutions, today announces the appointment of Elari Tammenurm as the new Chief Executive Officer (CEO) of its Estonian branch. Elari will support and maintain Creditinfo’s legacy as a leading partner for business and risk management decision making and drive the sustainable growth of AS Creditinfo Eesti.
Elari joined Creditinfo in 2019 as Director IT in the Baltics, progressing to Management Board member and Head of IT Baltics. Now as CEO, Elari will be responsible for the largest and oldest credit bureau in Estonia.
In his role, Elari will work with various internal and external stakeholders to ensure the company’s approach to strategy and growth remains first class in terms of meeting customers’ expectations and needs.
Elari Tammenurm, CEO of AS Creditinfo Eesti said: “Today everyone has access to vast amounts of data; however, the abundance of data can make it more difficult to make well-informed business decisions in an ever-changing business environment. In my new role, it’s my goal to further ensure the facilitation of this process through delivering world class solutions to the Estonian market including various new Decision Analytics and Scoring related products. This will allow us to continue driving valuable and positive outcomes for our clients and enable greater access to finance and economic growth in Estonia.”
Paul Randall, CEO of Creditinfo Group, said: “With roots in financial services and IT strategy, Elari knows how to solve our clients’ unique business challenges. His knowledge of the company, our people, our industry, and our clients is a huge advantage for AS Creditinfo Eesti’s innovation and growth as we continue to expand in the Estonian market. We’re proud to have Elari leading the way.”
END
About Creditinfo
Established in 1997 and headquartered in London, UK, Creditinfo is a provider of credit information and risk management solutions worldwide. As one of the fastest-growing companies in its field, Creditinfo facilitates access to finance, through intelligent information, software and decision analytics solutions.
With more than 30 credit bureaus running today, Creditinfo has the most considerable global presence in this field of credit risk management, with a significantly greater footprint than competitors. For decades it has provided business information, risk management and credit bureau solutions to some of the largest, lenders, governments and central banks globally to increase financial inclusion and generate economic growth by allowing credit access for SMEs and individuals.
For more information, please visit www.creditinfo.com / www.creditinfo.ee
Webinar: Baltic Market Overview
Register and join Jekaterina Rojaka, COO Creditinfo Lietuva , as she hosts another session on the Baltic market overview.
During this session, you will get the latest updates on the following:
- Improving sentiments – will it strengthen economic growth?
- Rising interest rates – what is the impact on the market?
- Sectoral perspective – losers and winners
Please complete the registration form below to receive the event link. The session will be in English – http://ow.ly/MSjh50NHVVX
Number of bankruptcies up by 26% in Estonia
Creditinfo’s bankruptcy survey revealed that the amount of bankruptcies grew last year for the first time in ten years and increased 26% compared to 2019 in Estonia.
Last time the number of bankruptcies grew significantly was due to the global economic crisis in 2008 and 2009 when the growth measured up to 150% in annual comparison. There was marginal growth (+2.4%) in 2017, but this was a shift by eight companies. In 2020, the number of bankrupt companies increased from previous year’s 271 to 341 ( 26%). The share of companies that have gone bankrupt is at 0.15% of all registered companies.
“The amount of bankruptcies remained at a low level in 2020, but there was still a trend of significant growth in the number of bankruptcies that we have not seen since the beginning of the previous great economic crisis. It may be assumed that this was partly due to the effects of the corona crisis, but since the bankruptcy process is long-term, we will probably see the greater effect here next year,“ explained Creditinfo Estonia’s analyst Helen Tinkus.
There was also growth in the last decade’s continuous downtrend of the number of asset-less companies, where bankruptcy rates dropped due to the absence of assets. During 2010-2019 the number of dropped bankruptcies decreased on average by 14% yearly. In 2020, the number of asset-less companies increased by 49%.
“This might have been caused by the fact that the economic environment had become insecure because of the corona crisis. More business plans failed completely and the companies were unable to gather any assets at all before the insolvency situation developed. At the same time, there were also some asset-less companies that showed substantial turnover numbers in the years prior to the bankruptcy,“ Tinkus added.
The areas with the highest rate of bankruptcy are still hospitality and catering, manufacturing industry and construction. The rate of bankruptcy was above the average in wholesale and retail as well.
“There have been no changes in the fields of activity with the highest bankruptcy rate in the recent years. But the share of bankrupt companies in the hospitality and catering sector grew faster than in others, both compared to other fields of activity and to previous periods. These are the fields that was influenced the most by the corona crisis and the restrictions. Based on the payment defaults and wage compensations statistics, we can predict a greater effect of the crisis on the companies operating in the field also in the coming years,“ Tinkus stated.
Creditinfo Estonia Ltd has conducted bankruptcy surveys about Estonian companies since 2000. During the 20 years the number of bankruptcies has both increased and decreased in waves, reaching the peak level in 2009 as a result of the global economic crisis. In 2011 the number of bankruptcies fell by a remarkable 40%, in 2012 by 20%. Bankruptcies have decreased steadily also in the following years, reaching the pre-crisis low level in 2015.
Ends.
Media Contacts:
Rain Resmeldt Uusen, Head of Marketing – Creditinfo Estonia
Email: turundus@creditinfo.ee
Tel: +3725018998
Creditinfo’s new KYC tool allows affordable background checks of international business partners
Creditinfo is the first company in Estonia to bring the shared KYC utility “Know Your Client” to the market. The tool gathers the data an entrepreneur needs to know about clients and business partners from both Estonia and international reliable databases covering the whole world.
According to the rules of the fight against money-laundering and financing of terrorism, each company is responsible for ensuring that every business transaction and cooperation agreement complies with the terms stated in the anti-money laundering law (the Anti-Money Laundering and Countering the Financing of Terrorism Act). In essence, it is the duty of a company to know their clients and business partners in case of both single transactions and longer business relationships.
“Every entrepreneur needs to check the background of the business partner because when the transaction reaches the bank, it may already be too late. The accounts may be frozen and you could end up losing the money,“ Jaanus Leemets, head of Creditinfo’s product development unit explained. “One questionable transaction, no matter how great or small sums are involved, may significantly increase the overall risk rating of the entrepreneur.”
The background checks of companies and individuals operating in Estonia has been a widely available service for years, but checking the background of international partners has been a great challenge for small and medium-sized companies. Access to reliable international databases is very expensive, and the offered solutions are often not suitable for checking single transactions or compiling detailed reports of the parties involved.
“Banks spend millions of euros a year on anti-money laundering background checks, leaving entrepreneurs stranded since they have no resources to afford these services. The results of public search portals are also often not reliable, extensive nor up-to-date enough in their content, especially with international companies, as well as also domestic inquiries. We therefore created a tool that makes inquiries from dozens of different reliable, international databases. The new tool is affordable to small businesses as well and it is also simple to use for single inquiries.“ Leemets added.
To get the entrepreneurs started, Creditinfo offers consultations on the correct implementation of the background check and its proficiency. There is also the option of joining the KYC business school in order to understand the essence of KYC regulations, the precise duties, everyday needs of their companies, and all available options to regularly check the background of clients and business partners without spending too much time.
Media contact:
Rain Resmeldt Uusen
Marketing Manager, Creditinfo Estonia
Email: rain@creditinfo.ee
