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Is Technology Tricking You Into Over-Tipping?

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As we continue to explore the bold new frontier of digital ethics here at InspireConversation.com, today we look at new forms of payment.

Modern forms of payment – such as credit and debit cards, digital wallets like PayPal and Apple Pay, gift cards, digital loyalty programs and app-based payments are changing the way we exchange money for goods and services. While several articles could be written about the psychological effects of paying with such systems over cash, the bottom line is that numerous studies have shown that such payment methods reduce what Duke Professor Dan Ariely calls the “pain of paying.” When we don’t use cash, we don’t have the same, visceral feeling of parting with our hard earned money, and thus are more likely to spend larger amounts.

Today we take a look at the idea of tipping in a world of digital payment systems. While a restaurant may still give you a check with a blank line, an increasing number of businesses are turning to digital payment kiosks and similar computer interfaces for payment. Usually, you swipe your card or wave your phone, and before closing out a transaction, the system prompts you to tip. More often than not, what they present you with are a few options. The customer will be presented with a choice of preselected tip amounts, as well as the option to input a custom tip.

A new report by tech research firm Software Advice, suggests that as a result of these types of payment systems, the frequency of tipping increased and the tip amounts have gone up by as much as 38%.

Let us take a look at some of the basic concepts and forces at work here:

  • Pushing to Tip is a good thing for service workers, and not necessarily a bad thing for customers. What is really interesting here is the effect at work. Because these payment systems will not close out a transaction until a tip is selected, they force the user to dedicate at least some cognitive effort to tipping. Gone are the days when you might simply forget to leave a tip, as your payment won’t be processed until you select something.
  • Pre Suggested Amounts play a powerful role in determining the amount we tip. Take for example, a taxi cab. Convention states that an appropriate tip for a taxi driver is anything from 10% to 18%. When suggested tips are programmed at 15%, 20% and 25%, there is a powerful psychological incentive to tip more. While a customer could simply select a “custom amount” of their choice, this takes additional time and most riders are less likely to do so. Left to the standard choices, most people naturally rule out the lowest one, because it feels cheap. In this example, even though the 15% is right in the middle of the acceptable range, most riders will opt for the middle of the preselected options at 20%, because it “feels better.” As a result, they tend to overtip out of convenience and a subtle psychological incentive to do so.

 

Those who design digital payment systems well understand human psychology. Do you think they are intentionally manipulating the customer with these methods, or are they simply setting up a convenient and efficient system for customers to leave tips?

Digital payment systems make it quicker and easier to settle up for purchases. At the same time, they make parting with our money quicker and easier –  which is dangerous if we aren’t paying proper attention.

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