How Tipping Is Changing And Fintechs Are Helping

Technology brings new expectations for staff, businesses and consumers

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Photo by Sam Dan Truong on Unsplash

The level of tipping in a country is impacted by national culture. In Japan, there is no expectation of tipping - it can even be offensive to tip someone, as good service is the norm and the expectation. The USA has a very generous tipping culture, but partially, it’s because many states have a lower minimum wage for “tipped” employees. So, to some extent, customers know that their tips subsidise the employee’s salary, and wages would need to increase without the tips.

Whilst the quality of the service is a major factor in leaving a tip and the amount to tip. One of the other major factors, at least in the USA, is the fact that workers who operate a tipped basis will likely not earn a high hourly wage without the tips. Source - The Pew Research Center.

In London, almost every restaurant adds a 12.5% Service Charge. The Service Charge is a tip, and it's added to every bill - you can ask for this to be removed, but that rarely happens. In the UK, outside London, the Service Charge is usually optional, with 10% being the average amount that most customers will add. Yet, there have been cases of the Service Charge not being distributed to staff and held by the restaurant. Some customers prefer to leave a tip directly on the table rather than pay it as part of their total bill. But this gets harder and harder to do in a cashless society.

In the UK 10-12.5% would be an average tip amount for a restaurant, in the USA this would be seen as a low tip amount - according to the Pew Research Centre.

In most contexts, tipping has traditionally been a reward for good service levels. Especially at restaurants and other places where the level of interaction between customers and staff is high. But, new business models and industries often leave consumers in a grey area. Compared to five years ago, 72% of Americans think that tipping is now expected in more places. According to The Washington Post, Americans are confused and frustrated by the new tipping culture:

"If it seems to you that almost everywhere these days, from coffee shops to takeout spots, there’s an added service fee, you’re not alone. People are feeling “tipflation” — the proliferating number of workers to whom consumers are expected to pay gratuities — with 72 percent saying that tipping is expected in more places today than it was five years ago."

One example worth referencing is food delivery services. DoorDash is the most popular food delivery service in the USA, with approx 65% market share. Before placing an order, suggested tip amounts get listed in the app. The tip amount seems to be less of a reward for the delivery being on time or delivered in one piece, but rather an optional extra delivery fee. Surely a tip in the true sense, as a reward for exemplary service, should be suggested after the fact?