Technology Adds To Our Tipping

Technology Adds To Our Tipping

By now, you’ve probably experienced it: After grabbing a cup of espresso, buying some ice cream or taking a cab, you swipe your credit card and prepare to sign — but you’re thrown a curve ball. The payment screen prompts you to make a decision about a tip you weren’t planning to give or at a rate that seems totally unreasonable. You see yourself with two options: Stand your ground and look stingy, or pay a small price to protect your positive self-image.

Increasingly, research shows, people are taking the second option, a trend that could have the power to permanently alter our society’s tipping standards. At a time when some are suggesting we toss out tipping altogether, technology is instead reinforcing the system and could be pushing our payment standards to a new tipping point.

Evidence is mounting that the electronic payment systems increasingly used in stores, restaurants and taxis prompt more customers to leave a tip, even in places where tipping is not usually expected. The payment systems often present multiple tipping options, such as 15 percent, 20 percent and 25 percent. One such credit card processing system, Square, has reported that the number of customers leaving a tip grew from 38 percent in 2012 to nearly 50 percent early last year. These payment systems not only encourage people to tip more frequently, but also push them to dole out larger amounts. For instance, tips given to New York City taxi drivers averaged about 10 percent in the cash-based system. With the introduction of credit card payment systems, the average tip grew to 22 percent in 2009.

But it’s not just the use of credit cards that is putting upward pressure on tipping (though it does have an effect). The one-touch payment process offered by technology like Square makes tipping a more mindless process. In a recent study, I had two groups of people simulate purchasing office supplies online. While both groups were told their purchases were being done by credit card, one group made the purchases by dragging and dropping tokens into a virtual cash register, while the other used a standard one-click option, as done on sites like The first group, which had to count its electronic dollars, spent significantly less money than the second. It appears that the less thinking customers have to put in to how much they’re spending — or tipping — the more money they’ll be willing to give.

Merchants are capitalizing on this idea with electronic payment systems that eliminate the math and narrow the possible tipping options, making tipping easier and therefore more likely. They’re also relying on our omission bias — our natural tendency to feel more guilt when we make an active harmful decision versus an equally harmful omission. By confronting customers with the option to tip, merchants are forcing them into an active decision. We view the decision not to tip in this circumstance as more morally objectionable than when there is no prompt — even though the merchant receives no tip either way.

All of these factors work together to encourage people to tip more, making consumers vulnerable to manipulation via credit card payments like Square. One in four active U.S. credit or debit cards made a payment using Square in 2014, according to the company, which has existed for just five years. As these devices continue to proliferate, the prompt to tip is likely to, as well. And as research shows, people are likely to fork over those extra dollars when prompted to. It is possible that, with these nudges happening in more places, new tipping norms will be established where the expectation of tipping has been more ambiguous, like coffee and ice cream shops.

Author: Kam Leung Yeung Special To The Washington Post.

Share This Post On

Our Newspaper Family Includes:

Stay up to date on business happenings in the Upper Valley and beyond with the Enterprise newsletter. Delivered to your inbox once per week!

You have Successfully Subscribed!