Tipping Tech: Do People Tip Less Paying From Their Phones?

If you’ve ever gotten a haircut, received a tattoo, had your nails done, or been to a restaurant, you’ve likely had to wrestle with how much to tip.

Similar to how payments have moved from analog to digital, so has the way we tip. What used to be a couple of dollar bills laid on the table or snuck into someone’s hand has become increasingly technical.

As fewer people carry cash and more utilize mobile payments, it begs a few questions. Do mobile payments make tips harder to come by? Are servers and baristas more likely to get stiffed by customers on gratuities, or are we just overthinking things? And is it possible that restaurants might be to blame for a drop in tips?

Myth #1: Do mobile payments mean fewer tips?

fewer tips

The world may be going digital, but manners still matter.

Early during the pandemic, restaurants, cafes, and other eateries pivoted toward contactless payment options, including credit cards, mobile payment apps, and Apple Pay and Google Pay. Cash, unfortunately, became a casualty of our digitized society.

Three years after the pandemic, tips are holding steady with pre-pandemic amounts. Our data suggests customers average about a 19% tip when they visit birdbill restaurants. Toast, one of the nation’s leading POS providers, saw similar stats across its platform. According to their data, tips averaged 19% at the end of 2021, up nearly 1% compared to the previous year.

Honestly, the amount people tip hasn’t changed much; what has changed is when employees see those tips.

When a server or barista receives a cash tip, they can use it immediately. Digital tips, on the other hand, are usually held until payday, taxed, and then disbursed to employees. They’re also easy for the IRS to track, meaning they are taxed regularly. Despite the IRS wanting all earned money taxed correctly, cash tips are generally harder to trace.

So, no, there isn’t any obvious evidence of employees earning fewer tips. But there is a bit of a delay in when and how they’re received.

Myth #2: Guests Like Being Told How Much to Tip

telling customer how mucn to tip

Some people like getting told how much to leave for a tip because it makes their lives easier. Others prefer having the freedom to choose based on their comfort levels.

We did a little digging into our data and learned that about nearly half of birdbill users tip 20% on their checks, which is the default amount in our app. Of the remaining group, slightly more than 10% of users tipped above 20%, averaging an astounding 27%.

Point-of-sale tip screens are becoming more commonplace in bars, cafes, restaurants, and food trucks. Usually, eateries can choose suggested tip amounts to display, allowing customers to select from those, along with a “no tip” option.

It sounds like a great idea that saves time and “guarantees” tips, but it could backfire if operators get too greedy.

What’s The Limit?

Restaurants, bars, and cafes that add tip requests to their POS systems see an increase in tips, but it’s a tricky balancing act.

Operators may choose suggestion options like 15%, 18%, and 20% to give people a basic selection. At the same time, tipping rules have remained unchanged for several decades, with many people choosing to leave 20% tips because the math is easy.

But what happens when the suggested tips become too much? What if 25% is the suggestion? What about 30%? If patrons are in a hurry and don’t have time to select the amount they want, they may skip the process altogether, leaving servers or staff with their hands empty.

Mobile payments combine the best of both worlds. Users can see and settle their tabs from the palm of their hand, then choose how much they want to tip. For example, birdbill has a default setting within its app that makes it easy to leave a tip without overcomplicating things. Guests only need to decide how much their default tip percentage is, and the app does the rest in the background.

When guests are free to pick gratuities without feeling pressured to leave an astronomically high amount or face the scorn of a jilted barista by selecting “no tip,” everyone wins!

birdbill tip

Digital Tips: New Methods, Similar Results

Digital tipping isn’t going anywhere - if anything, it’s only becoming more popular as people get used to it.

Like any new technology, restaurants and their staff need time to acclimate and figure out how to make it work for everyone. That means figuring out how to get tips dispersed quickly, ensuring guests know how the process works, and that it doesn’t seem overly intrusive or greedy.

For their part, guests haven’t changed how much they leave for a tip, only how they do it. Manners don’t get tossed out the window because guests use their phones to pay. If anything, guests should be more vigilant to avoid over-tipping as they breeze through the payment process.

But the general idea still holds: Guests will take care of their server if the service is good.