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Digitisation is hurting our tipping culture

Categories : Cash is easy to use, Cash is efficient
December 21, 2017
Published in : Cash, Payment instruments, Usage
The digitisation of payments is hurting those that rely on tips to complement their salaries. Not even P2P apps can fill the void as they are not universal, unlike cash.
Viktoria Dijakovic

There are losers in the digitisation of payments like workers that traditionally rely on tips to complement their salaries. If before we used to pay cash for our cab ride and leave the leftover change to the driver, today we simply get out of the Uber and walk off – the bill being swiftly sent via email.

The New York Times investigated the issue and found that jobs that were heavily reliant on tips have experienced a significant drop in income – sometimes amounting to 60% – as a result of the digitisation of payments; these include doormen, hairdressers, manicurists, taxi drivers and waiters. As people carry around less cash, especially in urban areas such as New York, and increasingly rely on various apps for food deliveries, taxi services, coffee and so forth, they are losing the habit of showing their gratitude for services rendered.

The problem is that for many smaller businesses offering an electronic tipping option is far from advantageous because credit card companies apply processing fees on tips, diminishing their perks even further. In the US, some have changed their tactics and downloaded Venmo – a popular P2P payment app used for settling dues between individuals. Thanks to the app, some businesses have found a way to resume tipping, but it doesn’t always work as these apps aren’t universal, unlike cash.

As W. MIcheal Lynn, a professor of food and beverage management at Cornell University says, “The problem is both parties, receiver and giver, have to have the app for this work and it’s difficult to create an incentive that causes both groups to sign on. Nobody has figured out how to fix that problem.”

One of our New Year’s resolutions could be to maintain our wallets armed with cash – a payment that is quickly and easily accepted by all with no hidden fees or technology involved – to once again show our gratitude for a good service. 

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