Tipflation: Pandemic sparks surge in digital tipping

Tipflation: Pandemic sparks surge in digital tipping

Pandemic Digital Tipping; banking industry

Professor Ismail Karabas from Murray State University highlighted a rising trend called ‘tipflation,’ marking a surge in tipping after the COVID-19 outbreak in the United States. This phenomenon, according to the professor, is likely a response to financial difficulties that many businesses faced during the pandemic.

With the rise of digital payment systems, customers are often suggested to tip more, to the tune of 25%, 30%, or even 35%. This has nurtured questions about the ethical implications for consumers.

The professor argues that while businesses struggle for survival, they must also ensure they aren’t overburdening their customers. This predicament calls for an effective solution to handle ‘tipflation’ without further stressing people already impacted by the pandemic’s economic fallout.

Karabas points to companies like Square, Toast, and PayPal, providers of digital point of sale (POS) systems, as major contributors to the trend. POS systems often have a tipping prompt, compelling customers to leave a gratuity, with the possibility of bolstering employees’ income.

‘Tipflation’ became prominent during the pandemic affecting restaurants, bars, and even sectors where tips aren’t conventional.

Tipflation: Evaluating pandemic-induced tipping surge

This is largely due to digital transactions becoming more commonplace, facilitated by POS systems that prominently suggest tips.

The pandemic drew attention to the fluctuating income of service workers, normalizing increased tipping. This trend of tipping is expected to grow outside of conventional service settings, signifying a broader societal shift towards greater empathy for service workers.

However, this also brings to light issues around wage disparities and precarious employment, making people question if the responsibility of wage consistency should be on the customers or the businesses themselves.

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Karabas warns that ‘tipflation’ might negatively affect customer satisfaction. Invasive and bothersome digital prompts could lead to customers avoiding establishments that consistently request tips. Balancing tipping requests with a customer’s overall experience is necessary.

Despite this, an economic advantage of an increase in workers’ salaries could result from ‘tipflation.’ Workers could feel more valued and motivated, although the impact on pricing tactics, customer satisfaction, and total business revenue should be considered.

Lastly, Karabas warns against customer discomfort with the increase in tipping requests, suggesting cash payments as a way to bypass digital prompts. He believes a careful balance should be maintained between implementing digital tipping systems and respecting customer comfort.


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