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Why it’s time to push back against electronic tipping

Editorial: New payment systems make tipping easier—and more expensive. Push the tip jar too hard and customers eventually push back.


 
Serge Krouglikoff/Getty Images

Serge Krouglikoff/Getty Images

The meal is done. Your server has been flagged down. The bill has finally arrived. Here comes the nudge.

Settling a restaurant bill these days typically involves slipping your credit card into an electronic device, which then asks for your PIN before smoothly inquiring about a tip. How about leaving 15 per cent, 20 per cent or 25 per cent? In bolder restaurants, the suggested tips may be even higher. Picking a different amount—or leaving no tip at all—is still possible, of course, but such a thing requires substantially more effort.

The ubiquity of electronic payment systems is by and large a good thing. But where most technological innovations empower the customer and promote efficiency, the exact opposite is occurring with electronic tipping. By exploiting quirks of human behaviour and the unspoken power of social convention, restaurants, taxis and other purveyors of the outstretched palm have been clandestinely ratcheting up the tips we leave. It’s time to push back against this sort of techno tip trickery.

It is a well-established consumer phenomenon that the quicker and easier payment gets—using credit cards, for example—the more we tend to buy. Another well-established fact of life is that most people seek to follow accepted social norms. Just as federal politicians have fixated on being seen to cater to the middle class, so too are Canadians prone to abiding by whatever appears to be the middle path in social interactions. No one wants to look like a skinflint by selecting the cheapest option; neither do we want to toss our money around indiscriminately. So when a restaurant suggests three possible tip amounts, they already know the middle option will be preferred by a substantial margin. And we prefer default suggestions to making our own calculations. (In fact, many electronic devices deceptively calculate tip percentages inclusive of tax, further exploiting our preferences for simplicity.) It all adds up to a shakedown most consumers don’t even see.

Using data from New York City taxi cabs operating out of LaGuardia Airport, American economists Kareem Haggag and Giovanni Paci last year examined the power of tip suggestions. One taxi firm presented its credit card customers with suggested tips of 15 per cent, 20 per cent and 25 per cent. Another firm prompted with 20 per cent, 25 per cent and 30 per cent gratuities. Both charged identical fares and travelled identical routes. Yet the cabbies with higher suggested tips earned substantially more gratuities because of how the choice was presented. “A small change in default tip suggestions has a significant effect on tipping amounts,” the economists discovered.

With new forms of electronic payments, such as Apple Pay, waiting in the wings, we can expect ever-more sophisticated versions of tip-choice architecture designed to make us tip more. Where 15 per cent was considered a generous tip for a good meal in the analog world, 20 per cent has become the digital age’s new norm. Do I hear 25 per cent?

Despite the apparent success of the technological imperative, however, tipping remains as illogical, inefficient and repugnant as it ever was. Why should electronic gizmos cajole us into hiking tips for waiters, waitresses, taxi drivers and hairstylists when retail checkout clerks, dental hygienists and mechanics make do with no tips at all? If a tip is meant to promote exemplary service, it hardly makes sense to add it after a meal is over. Or let the restaurant decide how much is sufficient. Besides, if tipping is absolutely critical to getting decent service, why isn’t it simply built into the cost of the meal?

Surely it’s time to rein in tipping before it gets even further out of hand. But how? Taking the time to hit a few extra buttons to customize your tip is one way to reassert consumer dominance. Some anti-tipping advocates suggest informing your server of your proposed tip as soon as you sit down, thus clearing the air in terms of motivation and removing the possibility of any technological nudge. On a broader scale, perhaps the many vocal advocates of higher minimum wages might want to make general angst about tipping an integral part of their cause. The notion of a living wage for all workers might seem far more attractive to many Canadians if it was packaged with a promise to eliminate the obligation to tip ever again, as is the case in many European countries.

Then again, perhaps there are limits to the outstretched hand that even technology can’t surmount. When examining the upward ratcheting of default tip amounts, taxi researchers Haggag and Paci found some riders, when faced with ever-higher tip suggestions, simply stiffed the driver rather than obey the nudge. “Customers are . . . more likely to leave no tip in response to the higher defaults,” the economists observed. Push the tip jar too hard and customers eventually push back.


 

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