How Do Mobile Payments Impact Tips?


Make sure your new system doesn't affect your staff's tips.

Mobile payments give customers a simple way to pay, and can even reduce the amount of time it takes to process customers’ checks to boost the efficiency of your restaurant’s operations. However, could the cost of convenience mean your staff won’t get the tips they rely on as part of their compensation?

Here’s a look how mobile payments affect tips, and how you can ensure that introducing this payment method into your restaurant’s business model doesn’t unintentionally impact tips.

Non-cash payments lend themselves to tips. Studies repeatedly show that customers tend to spend more freely when they use a credit or debit card to pay, compared to cash. The logic is simple: Because their purchasing power isn’t limited to the amount of cash in their pocket at any given time, customers don’t have to be so price-sensitive or hesitant. The difference of paying a few dollars more for an item doesn’t mean that they’ll run out of cash. Making an impulse buy doesn’t necessarily mean they can’t buy anything else until they can get more cash. Likewise, leaving a tip doesn’t mean that they’ll feel the immediate pain of being short on cash.

Mobile payments can remove the traditional point of sale equipment or cash register from transaction processing, but the customer experience is no different in terms of customers’ purchase behavior. Mobile payments may get them through their transaction faster than a traditional checkout line—but when the customer is not physically parting with dollars and cents, he/she is more likely to spend, and tip, with less reluctance.

Mobile payments don’t change the norms of gratuity. In America, leaving a tip at a restaurant is the norm—even when the service isn’t necessarily commendable, or the total cost of the meal significant. As Magnus Thor Torfason, a professor and co-founder of a mobile payment system, explained to Yahoo! Finance, the tipping custom is so engrained in American culture that a change in how we pay won’t impact the fact that we feel compelled to offer a tip in exchange for service in the restaurant and hospitality industries. For better or worse, tipping is part of the restaurant experience for many Americans. Regardless of the form of payment, it’s simply not seen as optional.

Wm. Michael Lynn researches the psychology behind tipping, and has done many studies specifically in restaurants that support the same notion. His research indicates that because the size of a tip isn’t always proportional to the size of the check, the key driver behind tipping may have far less to do with satisfaction of service—and is more driven by a sense of social pressure. When businesses introduce mobile payment transactions as a payment option instead of limiting the customer to pay with cash only, customers have no way to justify not tipping as they might when they don’t have enough cash on hand.

Mobile payments leverage suggestive tipping. Many mobile payment processors now empower restaurants to leverage suggestive selling during transaction processing to remind customers to tip. At the point in the transaction that the customer “signs” the mobile device with his/her finger, many mobile payment providers allow a restaurant to display a range of suggested tip percentages (like 10 percent, 15 percent, or 20 percent) of the check total, along with the dollar amount that percentage represents. (Many also give the customer the option to customize the tip of his/her choice).

Because this additional feature requires that the customer perform some action on the tip screen before he/she can move forward in the transaction to complete it, this step may prompt him/her to be more generous than he/she would be in a traditional credit card transaction. In fact, an article in Inc magazine says that tip frequency with one mobile payment provider grew by nearly 50 percent since the ability to add a tip was implemented.

Enhanced interaction can increase tipping. Studies indicate that customers are more likely to tip when they feel a relationship with the waiter. This sense of connectedness can be formed by little actions, like the server using the customer’s name, getting down to eye level with the customer, and simply bringing mints to the table. When customers pay at a restaurant with a traditional transaction, the waiter typically brings the receipt to the table for the customer’s final signature, along with the option to leave a tip. In many cases, the customer may not see the server again—regardless of whether he/she leaves a tip.

When restaurants use mobile payments, the waiter can process the customer’s transaction from start to finish, tableside. If a customer chooses not to leave a tip, he/she may have to indicate that fact in the waiter’s presence. If driven by no other reason than a sense of relationship and responsibility to the waiter, customers may be more likely to tip when mobile payments are used.

Mobile payments can give customers the opportunity to choose how they pay, and equip a restaurant to provide more seamless service, with low overhead. In tandem, the payment flexibility and face-to-face interaction a mobile point of sale provides may actually increase the frequency and quality of tips your staff receives.

The opinions of contributors are their own. Publication of their writing does not imply endorsement by FSR magazine or Journalistic Inc.


Kristen Gramigna

Kristen Gramigna is Chief Marketing Officer for BluePay, a credit card processing firm. She has more than 20 years' experience in the bankcard industry in marketing, direct sales, and sales management. Check out her on Twitter @bluepay_cmo.

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