restaurant check
Disbursements

Digitizing Servers’ Daily Tips

With 90 percent of diners at full-service restaurants paying with cards, cash ends up in short supply when waitstaff want to cash out at shift’s end. For a tip-dependent workforce, that’s a dead plate. In the new Disbursements Tracker, Brian Hassan and Justin Roberts, co-founders of Kickfin, explain how digitally disbursed tips can make payouts instant and safe for 2.6 million restaurant workers.

There are some 2.6 million restaurant servers in the U.S., many of whom rely on gratuities for a significant share of their take-home wages. Employees have no issues when tips are paid in cash, but when patrons choose to pay their bills with credit or debit cards, managers must often run to ATMs at the end of the night so servers can leave with the funds they’re owed. 

Cash management hardware and software solutions could put an end to late-night cash runs, according to Brian Hassan and Justin Roberts, co-founders of payroll solution provider Kickfin. Merchants can use these solutions to quickly digitize their cash earnings and issue payouts to workers via direct deposit or prepaid card disbursements. The pair recently spoke with PYMNTS about how digital disbursement tools are taking cash off the menu while also helping waitstaff be more financially responsible. 

The Persistence of Cash 

Many servers are financially dependent on tips, and they expect to instantly receive them when their shifts are over. This is becoming difficult, Hassan noted, because approximately 90 percent of transactions at full-service restaurants are made with credit or debit cards. Restaurants are left with a cash shortage as a result, which makes paying out tips challenging. Cash also presents servers with safety risks, he added, as they must often leave restaurants late at night and carry large sums on their persons until they can make deposits.

Restaurants can eliminate these cash-related hassles by embracing point-of-sale (POS) systems that can batch cash payments the same way they batch credit card transactions. These digital solutions can also instantly disburse payments into employees’ bank accounts or onto prepaid cards, and even notify workers via text message when deposits are made. 

“[Employees] are not leaving at the end of the night with cash in their pockets and do not have to go to the ATM to make a deposit,” he said. 

Helping Waitstaff Find Financial Responsibility 

Digital disbursements are doing more than just providing waitstaff with faster access to their earnings, Roberts said. Because the tips have been digitized and sent directly to their accounts, servers can be more practical about how their funds are spent. 

“I think you’re seeing behaviors change,” he said. “People are becoming more conscientious about their spending habits.” 

Servers are less likely to spend their earnings frivolously when it is immediately deposited into their accounts, Roberts explained. The funds can be held there and saved for essential expenditures like rent, insurance or bills, helping them to stay on top of their financial obligations. This also enables servers to build up credit for financial products like loans and credit cards. 

“By instantly paying them, we have real-time data and insights into what these employees are actually being paid,” Roberts said. “[From there] we can help them get financial products, non-predatory products and lending products they wouldn’t otherwise have access to.” 

Cash’s Double-Edged Sword 

Today’s consumers carry less physical currency, and one recent study found they prefer credit and debit cards at dine-in, fast food and coffee shop settings. Despite this trend, merchants do not want to alienate customers who still want to pay in cash. The March 2019 Retail Innovation Readiness Index noted that nearly 45 percent of surveyed merchants want to implement smart POS systems that accept cash. Various state and municipal legislatures have passed laws requiring them to accept cash, too, as it is often preferred by unbanked and underbanked consumers. 

Merchants may want to move away from physical currency because of its risks and challenges, but both Hassan and Roberts said these factors are likely to keep physical currency in use for the foreseeable future. 

“The reality is cash is not going away anytime soon,” Hassan said. “As it [is used less frequently], it becomes a bigger pain point that is more expensive and more difficult to manage.” 

Digital payments provide merchants an opportunity to quickly issue funds to their workers, while also enabling workers to pursue more financially stable habits. Cash is still a major factor for restaurateurs, however, and merchants will need solutions that make managing it as efficient as possible so long as it’s on the menu. 

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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