TTÜ thesis: Baltic Sea cable cuts could cripple Estonian banking

A master's thesis defended at Tallinn University of Technology warns that Estonia's financial sector's heavy dependence on external connectivity renders the banking system vulnerable. Disruption of Baltic Sea submarine cables could hamper daily payments and banking services almost overnight. The research recommends financial institutions develop independent local payment solutions for communication crises.

A master's thesis defended at Tallinn University of Technology highlights a worrying reality: Estonia's digital infrastructure, known as an e-state, is heavily dependent on external connections, meaning that even a serious break in the submarine cables lying on the Baltic Sea floor could bring the entire financial sector to a near-complete halt almost overnight.

The nature of cable risk

Estonian banking and payment infrastructure relies daily on international data communications running through Baltic Sea submarine cables. This dependence means that any serious cable disruption – whether caused by human activity, sabotage, or natural disaster – could temporarily shut down critical financial services entirely.

According to the thesis's findings, Estonian financial institutions currently lack sufficient preparedness for such a scenario. The research emphasises that local banks and other financial sector infrastructure should develop independent payment solutions that would function even if international connections are severed.

Recommendations for financial institutions

As a solution, the thesis recommends creating contingency plans and alternative payment systems operating at the local level that do not require continuous external connectivity to function. Such a solution would allow the country to maintain at least minimal payment capacity domestically in the event of a crisis.

The issue has become more acute in the broader Baltic Sea region's security context, where several suspicious submarine cable damage incidents have been registered in recent years. For Estonia as a digital society, such vulnerability is particularly concerning given that much of public services and economic activity operates online.