Tipping Goes Virtual as COVID19 Impacts US Restaurants

Digital transactions and credit card payments have been around for quite some time now. From ordering our favorite dishes to tipping, everything has become online. However, the trend gained momentum during the current COVID-19 crisis when contactless payment and minimizing cash transitions have become crucial for preventing virus transmission.

The year 2020 has seen a rise in the number of online orders and payments as customers are unable to step out of their homes for fear of contracting the virus. Moreover, many restaurants have also restricted their services to home deliveries and takeaways only, making more people order food online.

The issue that arose due to this new normal is the cash-based tipping system. Due to online delivery procedures, many eateries suffer from very little to no tipping, which hampered their cash flows. The pandemic has forced food outlets to switch to the digital medium of tipping, which is beneficial for customers as well.

Many restaurants have already adopted digital tipping procedures before the outbreak of coronavirus. However, if you still haven’t, it’s time to stabilize your cash flow through a digital tipping solution, about which we will guide you through in this article.

How Does a Digital Tipping Solution Work?

As the name suggests, in a digital tipping solution, customers pay their servers, bartenders, and other floor staff through electronic payment modes. Currently, there are two primary methods of tip payouts, including -

  • Instant Tip Payment Platform: This platform allows restaurant owners or managers to send tips to the bank accounts of their employees in real-time. Since no third-party is involved and the funds are transferred directly to the receiver’s bank account, it is faster than any e-Wallet payments like PayPal or Venmo, thus reducing waiting time.
  • Pay Cards: Pay cards are very similar to debit cards, through which the managers load the tips digitally onto the cards of the employees at the end of their shift. Pay cards, however, are not accepted by all ATMs or vendors and usually come with fees.

Also, it can take up to a few days for the funds to get transferred to the receiver’s bank account. This is why the Instant tip payment platform mentioned above is more preferable at many eateries.

Benefits of Making Digital Tip Payouts

Sending tip payouts is beneficial for all the parties involved - be it your business, your customers, your employees, or your managers. The major benefits of digital tip payments are -

●     Solve Negative Cash Flow Issues

Negative cash flow is a situation in which a business ends up spending more money than it has earned in a particular period. It is when a business is left with no cash after expenses. In 2020, this has become a rising issue for most companies, especially eateries. With digital tip payouts, all your worries about having enough cash at hand are taken care of, that too, at the end of each shift.

●     Keep Ahead of the Competition

Workers in the hospitality field often faced a highly competitive labor market, which made businesses even harder to retain talented employees. And new companies coming to the forefront with their advanced and more digitized technologies gave a harder challenge for them.

This is why having a digital tipping solution could be a great selling point for your business. Workers can rely on their employers now more than ever, and you can even use this as a tool for hiring new employees.

●     Avoid Payroll Tips

Some food outlets have decided to switch from cash tips to payroll tips for having a low-cash environment. However, this is not very advantageous for the employees, as they can’t wait for weeks to receive their earnings, especially those whose total shift hours have been reduced.

The new digital tipping solutions can even handle this efficiently since all the employees receive the same level of accuracy and transparency. All your employees will have real-time access to the tips they deserve before walking out the door, thus building trust and positivity.

●     Save Time and Money

You can save your valuable time and money by opting for a digital tipping platform as it gets the calculating and distributing tasks easier for you. Managers can save up to a few hours spent in counting, recounting, and distributing every week, and the admin is left with very little manual work. It not only streamlines your tasks but also reduces labor costs.

Further, cash tips often come with hidden costs, such as rounding off the amount to the nearest figure when the managers don’t have the exact change. If this happens every day or at the end of every shift, the extra amount starts adding up, which results in a loss of cash in the long run. With digital tipping, this issue is solved as the employees receive the exact amount they owe.

●     Focus on the Safety of Your Employees

During this pandemic situation, your employees’ safety and health should be your utmost concern. Reduce the chances of cash transactions as far as possible by incorporating a digital tipping solution into your workflows. This will minimize any possibility of viral transmission.

Moreover, it will also enhance the financial security of your employees, as they can receive tips in real-time and won’t have to wait for days. It will help them meet all their immediate day-to-day essentials without having to compromise. This system of instant payouts is a significant factor your employees are relying on you.

Additionally, an instant tip payment solution reduces the cases of theft, since your employees will no longer need to travel home with pockets full of cash, especially those who work till late nights. With the digital tip payout platform, your employees’ money will be safe in their bank accounts.

●     Reduce Human Errors

While distributing cash tips, there are high chances of miscalculations while counting and recounting. Besides, cases like skimming or theft before distribution are also common in cash payouts, leading to tip disputes. With the digital tipping systems, this issue is solved since the calculations and even sometimes, the distributions are automated.


In a nutshell, while making the switch to the right restaurant merchant services provider, ensure to check all the terms and conditions with your digital tipping service provider. Before investing in any, you can also request a customized demo for your chosen platform to understand how the system works. An efficient digital tipping solution will have huge benefits for your business, your employees, and your customers in the long run.

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