"Since 2022, at least 10 seabed cables and pipelines in the Baltic Sea have been damaged, including the Nord Stream gas pipelines, Balticconnector, the C-Lion1 and BCS East-West Interlink telecommunications cables, the EstLink 2 power cable and Elisa telecommunications cables," listed Peeter Madisson, author of the master's thesis. In light of these incidents, he said the state must increasingly prepare for situations in which it has to function in complete isolation.

Achieving autonomy is complicated by the fact that the financial sector's digital lifeblood depends on a highly complex and globally distributed network. "For example, Estonian financial institutions make extensive use of cloud services (such as AWS), international payment systems (Mastercard and Visa) and authentication services located abroad. This means that a disruption of international connections would not affect only individual systems, but could paralyze the entire service delivery chain," Madisson explained.

To prevent a domino effect, the European Union and the Estonian state have imposed strict requirements on providers of vital services. One of the key measures is island mode operation, meaning a system's ability to function locally without any international connections. "These regulations create a direct need for the systematic consideration of island mode operation in the financial sector," the thesis author emphasized. Although the rules are strict, systems can never achieve complete independence in practice because banks are too deeply intertwined with global infrastructure.

Because complete independence is difficult to achieve, institutions must find an appropriate balance. "Island mode operation therefore cannot be viewed solely as a technical solution, but also as a compromise between functionality and availability," Madisson said. In the practical part of his research, Madisson used LHV as an example to describe what such a compromise architecture could realistically look like in Estonia. The proposed local cloud service, hosted in Estonia, would allow a bank to operate autonomously, provided its systems can switch name servers, activate applications and resynchronize data once communications are restored.

Without additional measures, the effects of a crisis would quickly reach ordinary citizens' wallets and daily lives. The first obstacle during a routine shopping trip would arise the moment a person tries to authenticate themselves on a smart device or payment terminal. Familiar applications would stop working because, even for payments at a local store, they require continuous communication with servers located abroad. According to the thesis author, banks must therefore ensure that at least one method of identity verification can function locally.

According to the study, local identification would primarily require support for the ID card and Mobile-ID. The thesis notes that when logging in with an ID card, banks need a local system capable of independently verifying certificate validity. During a crisis, Mobile-ID could be used only if institutions switch the service to a local short message service (SMS) platform. As for Smart-ID, which is widely used on smart devices, the author recommends carefully mapping the points at which the solution would cease functioning without international connectivity. If it fails, an alternative authentication method must be ready.

If local servers can successfully identify customers, banks must also ensure that money can actually move at the checkout. Because domestic card payments in Estonia currently often depend on international processing centers, the study recommends adding a separate autonomous mode to chip cards. Such a technical solution would allow payment terminals to process transactions even without an internet connection. However, since banks would be unable to verify account balances in real time while offline, fixed spending limits would need to be configured on the cards.

Because such a local payment system would be intended only for emergencies, the study recommends keeping it operational solely for providers of essential goods and services. This means the state and the financial sector should compile lists to ensure that payment terminals at pharmacies, grocery stores and gas stations receive priority. To make transactions possible on-site, banks would also need to cooperate with card schemes and configure local parameters in advance. The viability of the entire solution would have to be continuously tested.

While adapted chip cards could solve the problem in physical stores, a communications outage could render the digital services of Estonia's e-state inaccessible. Nearly 60 percent of local websites providing vital services rely on foreign content delivery networks (CDNs), which normally help pages load faster. If international connections fail, such portals could collapse instantly. "The state should require that websites and customer channels for vital services remain accessible even without foreign CDN services," Madisson said.

To reduce dependence on foreign providers, institutions should transition to local servers. "It is advisable to implement a hybrid CDN solution where critical resources are also available through local edge servers, or to abandon CDN services entirely for critical services," the researcher added. In addition to local servers, the thesis recommends creating a separate system for managing name servers. According to Madisson, such extensive changes would require a dedicated national framework that continuously tests institutions' crisis preparedness.

Alongside the autonomy of virtual servers, the survival of the digital state depends just as heavily on physical infrastructure and energy supplies. IT infrastructure made up of steel and cables requires a continuous fuel supply to keep backup generators running and data flowing. In the study, Madisson proposes that the state add data centers and telecommunications base stations to national fuel-priority lists. In his view, resilience also requires logistical preparedness that would allow fuel to be distributed quickly when needed.

In addition to domestic logistics and technical changes, the state must reach broader agreements with neighboring countries. The master's thesis recommends treating the Baltic region as a single entity and involving Latvia and Lithuania in joint planning for isolation scenarios. Shared plans with neighboring countries would diversify Estonia's international connections and force all parties to clearly define how the state and communications operators would interact during a crisis.

In the long term, however, Madisson believes Estonia should take an even more far-reaching step by establishing a local processing center capable of handling payments domestically without Mastercard or Visa processing centers. Such an independent system would allow local card payments to be authorized autonomously and help keep the economy functioning even if digital links to the outside world collapse.

Madisson defended his thesis, "Implementing Island Mode Operation to Ensure the Availability of Critical Banking Services During Communications Outages," on June 2. His supervisor was Professor Gert Jervan, dean of the School of Information Technologies at Tallinn University of Technology.

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