The Impact of Cashless Tipping and Digital Tipping Software
September 20, 2022
Reading time: 2 minutes
Back in the day, tipping meant counting out bills and change or adding a tip to a credit card transaction. Today, a tipping platform like YouTip or Tippy offers automated tipping options that make settling a restaurant or takeout bill seamless – speeding up transactions and improving the entire customer experience.
The Decline of Cash
Cashless transactions are especially popular with Millennials. A 2019 report from Experience showed that one of every 10 Millennials used a digital wallet for every purchase. Mobile apps like Venmo and Zelle allow direct peer-to-peer payments and are heavily used by Millennials.
With the ongoing COVID-19 pandemic, contactless payments have become increasingly popular among consumers of all ages. According to a 2021 article in The Fintech Times, cash transactions decreased by more than a third in 2020. That year, more than 13 million people used digital payments exclusively – more than double the previous year.
The Convenience of Cashless Tipping
Digital tipping software makes tipping more convenient by removing the guesswork of calculating tips. Instead, users are presented with a tip menu of precalculated percentage options or the choice to enter a custom tip amount. Likewise, a touchless payment process using debit or credit cards that includes a tip option makes tipping seem less like handing over actual cash, which also tends to increase tip amounts.
According to a May 2022 article in the Wall Street Journal, the average taxi cab ride tip was 11% higher when riders were presented with a tip menu within a cashless tipping system.
Setting tip menu minimums at 20% versus 15% also tend to result in higher tips. This process, known as “anchoring,” is designed to establish a higher tip amount as a standard. One of the most well-known users of anchoring is Square – a credit card reader that can be connected to a smartphone or tablet to allow small businesses and individual entrepreneurs to accept credit card payments without a stationary payment station. Likewise, requiring customers to consciously select “no tip” versus having no tip be the default tends to generate more tips at establishments such as ice cream parlors or coffee shops.
Increased Tips and Improved Customer Experience
Integrating cashless tipping options into the checkout process can increase tip frequency and produce larger tips. However, the convenience of cashless tipping can be significantly reduced if the process of tipping involves multiple steps. In one instance, a glitch within the Square system that produced a separate tip screen versus having a line for tips included in the signature screen resulted in significantly lower tips.
Understanding payment trends such as app-based tipping can improve customers’ shopping or dining experience and future-proof your business. PayTech Trust works with clients to help them integrate cashless payment solutions into their operations. Contact us today for more information.
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