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 Amazon.com. 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 to not 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. And these kinds of devices are becoming very common. 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.
There’s evidence that our society’s tipping standards are very malleable, and already may be changing. The standard restaurant tip has risen from 10 percent to almost 20 percent over the past century. But it doesn’t take that long for change to happen. According to Zagat, Americans’ average restaurant tip rose from 18 percent to 19.2 percent in the decade after 2000. Now some are making an economic argument for a 25 percent standard.
Some might argue that companies like Uber, which doesn’t have traditional tipping, are pushing society toward eliminating tips altogether. But in reality, their impact could be quite the opposite. Instead of having customers choose how much to tip servers, UberTAXI and some restaurants automatically include a 20 percent charge in customers’ total payment. That takes the tipping decision even further out of customers’ hands and makes it more susceptible to increase.
As long as designers of these digital-payment terminals are free to test what makes people tip more, it’s unlikely that the upward pressure on tipping standards will end. Regulating the payment interface design features would help ensure consumers’ tipping behaviors are not exploited by technology. For instance, when consumers are prompted to tip, requiring that they enter the tipping amount, instead being given one-touch options, would create a fairer system. Better yet, masking the amount entered with asterisks — as when a PIN is entered in an ATM — would help mitigate social pressure from the cashier and other customers to give a bigger tip. If we want to resume a system of truly voluntary tipping, we should eliminate prompted tipping on digital-payment terminals altogether. Before society is pushed to an even higher tipping norm, consumers should be protected from manipulated and guilt-tips. Instead, tipping should serve the purpose it was meant for — a true appreciation of excellent service.
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