The coronavirus has spawned a fear over handling cash, creating a problem for the common practice at restaurants of using a card to pay while leaving cash for the tip. Given the challenges and restrictions tied to reopening, it's a conundrum eateries can ill afford.
Between 60% and 80% of payments in restaurants are made with a card and tips are often attached to that card. But not all restaurants have the technology to accept digital tipping--and there are also regional differences that complicate tipping.
"The tip payment process varies substantially in different regions and countries, and in different industries," said Maria Vinogradova, director of strategy and market intelligence at OpenWay.
The process is not the same in all parts of Europe, making it even more complex for merchants and consumers. "In some countries, tips are still paid in cash even in situations when the main transaction takes place on a payment card," Vinogradova said. "Or an acquirer might support only one algorithm for tip payments, such as all tips going to a same account along with the main payments."
Belgium-based OpenWay is part of a growing market of technology providers that are embedding tips in bills by allowing acquirers on its
When the customer enters a tip amount in the mobile POS terminal when paying, the tips are transferred directly to the service worker's card at the end of the daily shift.
"As far as digital tipping, those restaurants with mobile apps, primarily QSRs and fast casual, are further along in my view, as they are already digital-based, and many are now incorporating the tip function along with mobile order and pay," said Raymond Pucci, director of merchant services practice at Mercator Advisory Group.
However, table dining has a long way to go for digital tipping, as pay-at-the-table has not been widely adopted yet in the U.S., Pucci said.
That's a nut that OpenWay is trying to crack, as the digital tipping service works through a mobile POS held by the server at a table and the software delivers the tip information to the restaurant network.
Digital tipping may prove to be a comfort zone for consumers in a post-COVID return to normalcy, Pucci suggested.
"This will change, but slowly, as the shutdown unwinds and surviving restaurants know that diners would rather avoid physically exchanging cash or plastic with the wait staff," he said. "But the reality is that restaurants are facing a higher cost structure due to safety and health measures, and are also operating at unsustainable seating capacity restrictions. So digital tipping solutions will not be at the top of their to-do list."
Still, any new smartphone app advancement for tipping in the service sector addresses the reality that the practice has had various trials and tribulations in the digital payment era, especially since the EMV chip card came into more prominent play globally in the past five years.
In the months prior to the EMV chip-card liability shift in the U.S. in 2015, it was still
That issue was eventually resolved for many restaurants with various new features, including a list of potential tip amounts that could be picked ahead of time, but also with technology for the POS terminal to allow a tip amount added to the sale on an EMV card. It eliminated much of the consternation about when a tip could be added, particularly on a chip-and-PIN transaction that was not as common in the U.S. as in Europe.
Prior to the restaurant shutdowns in the wake of the pandemic, Fiserv had introduced the
There's even
It's also important for acquirers to deploy a tipping software that addresses the concerns of merchants and consumers alike in general, as well as specifically during a time of reopening during COVID-19 in which restaurants, hotels and salons are operating under new safety guidelines and practices.
"We see that fintechs are now entering this market and starting to offer their own tipping solutions," OpenWay's Vinogradova said. "Acquirers can either watch these new companies eat their share, or grab their own by introducing solutions to the merchants they serve. There is no one-size-fits-all solution, because what works for a tavern in Greece may not work for a diner in the U.S."
It's important that the digital payment process reflects as closely as possible the payment scenario which is required by the specific acquirer or merchant, Vinogradova said, adding it has to be technology that does not limit business development, but supports it along with new payment scenarios that may come along in the future.
