Do digital payments affect tipped wages in hospitality?

Digital payments are primed for growth, especially as Google prepares to enter the fray with its own “Google Pay” for one-tap payments via Android phones.

So as consumers increasingly shift to paying via digital platforms, how does it affect their tipping?

This behavioral shift is important for hospitality managers to understand, as it affects how tipped wages are factored into the overall wage structures of hospitality venues at hotels, cafes and restaurants.

A recent survey by SoftwareAdvice queried the tipping habits of 382 people who had recently completed a transaction via an iPad point-of-sale. It turns out that digital payment systems that include a recommended tip, as well as a server that is present during the tip phase of the transaction, are providing an increased wage basis due to higher tips.

Overall, an iPad POS system has the most impact on tips when the server is nearby. This would be during a transaction that is either signed at the table or at the register in a quick serve situation.

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When it comes to entering the tip, an overwhelming 86% of respondents want to be able to enter their own tip into the system. This means that they would prefer not to either be asked by the worker about a tip, or to sign a receipt that would then be entered into the POS by the worker.

If the server was responsible for entering the tip into the system in front of the guest, those surveyed tipped “much more” or “somewhat more” 31% of the time. That’s a lot of folks offering larger tips when inputted directly by the server!

The gender breakdown of this situation is even more interesting, as females are more generous when face-to-face with the person being tipped.

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One of the most theorized means of encouraging consumers to leave a tip is to require an “opt-out” button when a consumer is finishing the transaction on an iPad. The survey bears this out:

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There’s no word yet on how more seamless tap-to-pay situations will work out for tipped workers, as each of these integrations has its own interface. Ideally, there would be a tip screen prior to closing the tab, as with the Apple Pay integration on OpenTable. Even so, it seems that digital payments have a very similar

Even so, it seems that digital payments have a very similar impact on spending habits to credit cards, where the absence of cash causes consumers to spend more overall while also encouraging higher tips. The research linked previously also called out a 2014 study that found a 38% increase in tips for merchants after implementing digital payments POS Square.

Digital payments do seem to have a real impact on front-line hospitality workers. So go digital and tip away!

NB: Digital payments image courtesy Shutterstock.

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Nick Vivion

About the Writer :: Nick Vivion

Nick is the Editorial Director for tnooz. Prior to this role, Nick has multi-hyphenated his way through a variety of passions: restaurateur, photographer, filmmaker, corporate communicator, Lyft driver, Airbnb host, journalist, and event organizer.

 

Comments

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  1. Gerald Jordan

    The US system of tipped wages is so absurd that it it really turns off Europeans and travelers from other parts of the world not used to tipping beyond rounding up to the next dollar.
    Seeing the proposed tip on top of an already hefty restaurant bill is consistently one of the worst customer experience issues for foreigners traveling to the USA (Europeans are used to prices that include waiter salaries and all taxes).
    “All tips and taxes included” price tags could certainly help to improve customer satisfaction and proclivity to spend more as the ignorance-embarrassment factor and the negative feeling about the unexpected price markups are eliminated.

     
  2. Glenn Gruber

    Nick, I think the biggest impact will be on the “reported wages, tips” of tax returns. I’m sure that’s the bit that will upset wait staff the most 🙂

     
    • Nick Vivion

      Nick Vivion

      There will most definitely be some sticker shock when staff sees in the increase in tips. Even with the taxes, tipped staff makes out with more cash than they did before with digital payments. That’s another reminder that “digital cash” has less weight in consumers’ minds and has a real impact on the financial health of our world.

       
 
 

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