EMV changing how we tip? Not so fast
Despite initial confusion, EMV doesn’t have to disrupt normal tipping process
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For years, U.S. restaurant goers have experienced a fairly consistent tipping process: Give a server your card and wait for your receipt, where you sign and add a tip, if you so choose.
However, the introduction of EMV payment technology in the U.S. sparked concerns that restaurants would have to ditch this "traditional" payment and tipping process in favor of models that are commonplace in other EMV environments.
"The original thought was, 'Oh my gosh, EMV dismantles that process because the whole transaction has to happen at the table,'" said Steve Mathison, vice president of payment acceptance for First Data. "It's true in that in Europe they typically bring the transaction to the table, and because of their culture, it's OK for the server to stand there and watch that whole payment and tipping process happen. That would be uncomfortable here in the U.S."
As some restaurants made the transition to EMV prior to the Oct. 1, 2015, EMV liability shift, reports of tipping changes -- and potential problems -- emerged. "When EMV [payment terminals] were first implemented in restaurants, many did not give users the options to provide tip adjustments with EMV," said Mike English, vice president of product development for Heartland Payment Systems.
For restaurants used to processing tips based on paper receipt information, this abrupt change, which was mostly due to incorrect payment system programming and a lack of EMV education, threatened to turn restaurant payment practices upside down.
However, the "standard" paper slip tipping method many are accustomed to in U.S. doesn't need to change -- unless merchants want it to.
"There is nothing about the EMV specifications that prevents or prohibits a restaurant from being able to accept tip add-on when a customer uses an EMV card if that's their normal mode of operation," said Randy Vanderhoof, executive director of Smart Card Alliance.
PINs aren't the problem
The "pay and tip at the table" process practiced by many foreign restaurants works well because those EMV cards have a PIN option.
Once PINs are involved in a payment, the tipping process needs to change because consumers have to be present when a card is dipped to enter their PINs to complete the transaction. The nature of such cards also requires tips be added to bills before processing the card, as the addition of a PIN finalizes a transaction and would prevent servers from making changes later. Table pay models allow the entire transaction -- tip included -- to be finalized all at once.
However, chip-and-signature credit cards are currently king in the U.S. And even those issued as chip-and-PIN have a signature verification option tied to them, so the tipping process U.S. customers and merchants are used to does not need to change.
System programming key to easy
Currently, if a restaurant or other tip-supporting merchant is still unable to support the traditional paper slip tipping procedure, a lack of correct payment software programming is probably to blame.
For example, "a point-of-sale terminal was delivered and not set up properly, which is probably the fault of the institution that sold it," Vanderhoof said. "Or, a merchant acquired the [point-of-sale] device themselves and didn't understand the proper set-up sequence so when the terminal was first used, it didn't work properly."
There are three basic acceptance models for EMV card-based tip and gratuity payments:
This is the primary method used at table-service restaurants in the U.S. It allows servers to take payment cards away from the table and to a payment station for processing -- either via dipping or swiping the card, whatever technology the card supports.
A receipt is then printed for the cardholder to sign, which authorizes the transaction and a tip, if the customer chooses to add one. The total transaction will then be settled later to include the tip.
2. Counter pay.
This is where a customer brings his card and bill up to a counter to pay and tip at the register together.
For this process, cardholders follow prompts on a payment terminal to add a tip, dip one's card and then authorize the total transaction amount. The same procedure could also be used at a café-type environment, where one might order and pay at a register before receiving food or drink.
3. Table pay.
This process is essentially the same as counter pay, except servers bring the receipt to a customer's table via a portable payment terminal, which could be in the form of a tablet or smartphone. Customers can then follow the terminal prompts for payment and tipping and the merchant will be able to authorize the total payment at one time.
Tipping evolution will continue
The U.S. payment environment will continue to evolve as EMV adoption spreads, so tip-accepting merchants should do something to ready their payment systems for all kinds of payments, if they haven't already.
"I foresee a day that we move from predominately chip-and-signature cards to chip-and-PIN cards and in doing so it will behoove restaurants to implement a convenient way for patrons to pay," English said.
This could mean simply ensuring a point-of-sale system is equipped to process all transactions with tip allowance, but for others, it could mean migrating away from a central checkout system to something more mobile. It's more about when, not if, U.S. restaurants will migrate toward more mobile or table payment solutions, based on what other EMV-friendly countries are doing. However, each technology upgrade has added implementation costs, so for now, most restaurants will continue with business as usual. In most situations, consumers will continue to add tips to paper receipts.
Help for restaurants having EMV-tipping troubles
If you run a restaurant struggling to accept tips in a way that works for you since adopting EMV payment technology, start making phone calls to get more information about the options you may have.
"The best place to start is with the payment processor and then go to the point-on-sale provider to find out what options may be available to you," Mathison said.
Here are some additional resources that shed more light on restaurant EMV payment and tip processing:
- Credit card on/off switches: More card issuers adding them – The digital switches give cardholders greater control over their accounts and can help reduce card fraud ...
- How to set up the right 'default' card on your mobile wallet – Default cards on digital wallets such as Samsung Pay and Apple Pay are the new "top of wallet" cards. Use these tips to set up and pick the right one to maximize rewards ...
- Will 'pay pain'-free mobile wallets make us poor? – Mobile wallets are convenient, but hide the pain of parting with money. Will the new payment forms make us poor by making it easier to overspend? ...