Digital Payments Breeds Big Tippers

Digital payment systems are making consumers nicer.

Well, to be precise, it’s making consumers better tippers.

Thanks to subtle tactics like default tip amounts in apps, preset buttons with tip amounts and percentages already calculated and presented at just the right moment, consumers who use apps and check out at merchants, use cards and pay digitally in taxis and even use cards to play the slots in Vegas, are becoming, accidentally or not, a lot more generous.

According to a recent study by Software Advice, an analysis company for POS systems, the increased adoption of mobile payments apps and digital payments terminals not only creates a more streamlined and faster payment process, it eliminates the need for customers to do the math when deciding how much to tip. Apps now come with sliders with preset tip amounts that range from 0 to 25 percent while also allowing someone the choice to manually enter a tip or to leave no tip at all. Digital POS environments, like taxis, have touchscreens that offer a tip amount that is sometimes presented in dollars and not in percentages – making it harder for the consumer to do the mental math and easier just to pick “$3” even if $3 ends up being 25 percent of the fare. Apps and digital POS systems also make it harder for people to forget to tip in the first place, even if that lack of forgetfulness can be chalked up to the fact that selecting a tip is done automatically through a default setting in an app or the presentation of a screen that requires a conscious effort to actually decide not to tip.

Which seems to have really worked really well and in favor of those on the receiving end of the tip.

The addition of more visible and automatic tipping features has created a bit of a windfall for those who rely on tips. Apps and digital POS systems have been found to increase a person’s tip by 38 percent. And, this has little to no correlation with consumers actually feeling that they receive a level of service that’s better than average or even better than they might have received previously.

So, the question that remains is whether these sliders or buttons are actually tricking consumers into being more generous with their tips than they originally were planning.

And, it’s a question that Nir Eyal – an expert on the intersection of psychology, technology, business and use design – has recently pondered.

According to Eyal, these digital payments systems are doing more than helping make the payments process more streamlined and easier for the customer. By eliminating the “pain of paying,” consumers find it much easier to part with their money. Digital money, to consumers, seems to feel less real than having to count the cash for the tip or even write the amount on a receipt.

So, thanks to apps and cloud-based POS, businesses are being buoyed to profitable new highs, while also helping to increase customer acquisition and engagement.

Who would have thought that making tipping so easy would actually have such an impact?

That’s just one of the many insights and topics of conversations that Eyal will uncover at The Innovation Project 2015. He and his panel of retail payments all-stars will engage in an off-the-record conversation on all things payments and consumer engagement on the afternoon of March 18 in a session entitled From Acquisition to Engagement.

And, it’s a conversation that will only be had at The Innovation Project 2015.

Care to listen in? Register here.