New technology creates tipping dilemma in Sonoma County
If you’ve visited a restaurant, salon, spa, coffee shop or other small retailer in recent months, you’ve probably noticed something new when it came time to pay the bill. Their new digital point-of-sale terminals let you slide your credit card through a smartphone or tablet computer and sign the tab with your finger.
You may also have noticed that most come with built-in tip calculators that subtly encourage consumers to leave a gratuity. Before finishing the transaction, a screen appears that prompts the customer to choose among preset tips (15%, 20%, 25%, for example), enter a customized amount or consciously opt out.
In addition to helping people calculate their tips, these digital Point of Sale terminals also are boosting the bottom line for people who count on gratuities. A widely-cited 2014 Iowa State University study found that tipping has increased by 38 percent since the new technology was introduced.
“The big issue here is that this is putting a new social pressure on customers,” Michael Lynn told the New York Times. “It’s up to me to leave the change in the tip jar, or not,” said Lynn, a professor of consumer behavior at the Cornell University School of Hotel Administration, who studies tipping. “Yet when you turn the screen around and I have to explicitly click ‘No Tip’ in front of you, that’s a lot harder.”
At Santa Rosa’s Dolce Vita Hair Salon, where five of 16 stylists use mobile POS terminals, “I would absolutely agree that tipping has increased,” said manager Kelly Cramer. “When the screen shows the tip boxes with different percentages and the custom option, most people hit the 20 percent button.”
Carley Jones, a hair stylist at Studio 614 in Santa Rosa, also has noticed a bump since she switched from traditional credit card processors to The Square, a digital card reader about one-inch square with a short extension that plugs into the headset jack of an IOS/Android smartphone or tablet.
“I’d say this system has definitely increased tips,” she said. “When it’s time for the client to sign off, I hand over the phone and they can add a tip if they want to do so. I’d say this system has definitely increased tips. The little buttons prompt them to make a tip choice, they press one, and that’s it. It’s just easier to tip.”
That’s not The Square’s only appeal, Jones said. “The big difference with the Square is that it’s portable. I do weddings - hair and makeup - so if I go on site somewhere, all I need is the Square and my phone or iPad and I can accept payment. And customers love using this new technology. It’s so easy. I’d say convenience is the biggest positive.”
The Square and a growing number of competitors, including Lightspeed, POS Lavu, TouchBistro, PayPal Here and Shopify, are quickly expanding the definition of who and how we pay. In theory, every smartphone or tablet owner could be a merchant, a group whose ranks increase each day. A late 2014 Pew Research Center study found that 58 percent of American adults possess a smartphone, while 42 percent own a tablet computer.
Depending on the system and software used, mobile POS devices can be wirelessly connected to a central system (a restaurant that equips its wait staff with tablets, for example), or they can simply be standalone tablets or smartphones connected to the owners’ bank accounts, a good solution for a self-employed individual. Examples include independent contractors in beauty salons, food truck owners, craft fair and farmers market vendors, walking-tour guides and volunteer fundraisers.
In her role as president of Santa Rosa American Little League’s Booster Club, Cramer added mobile POS two years ago as a new payment method for game-day sales of logoware and other items.
“We began using The Square,” she said. “People loved it right away because they didn’t have to write a check or carry around a lot of cash to buy something. Up to then our sales on a regular day were about $1,000, but with The Square they’ve skyrocketed to an average $4,000.”
As it becomes easier for consumers to pay, noted Kam Leung Young, author of the Iowa State University study, “the tendency to overspend is likely to increase. Consequently, policy makers need to determine the acceptable options for consumers to complete their payments, whether they are online or not, instead of letting companies have full control as they do now.”
Many psychological issues affect the overspending choice. When presented with a choice of three predetermined tip amounts - let’s say 15, 20 and 25 percent - a cognitive bias known as anchoring cues people to pick the middle option. So even if you’ve tipped your server a set 15 percent all your life, you’re likely to press the 20 percent button on a mobile POS device.