How Technology Lures You Into Leaving Bigger Tips

Have you ever found it hard to rethink a “suggested tip” amount?

For many vendors, that’s the goal. According to a recent article in Yahoo Finance, the digital “tip nudge” is becoming more and more common as businesses move to new mobile payment technologies and seek to recover what they lose in transaction fees.

Starbucks is one of the companies at the forefront of this movement. The high-end coffee vendor announced Wednesday that a new update to its payment app will prompt smartphone-paying customers to tip their baristas between $US0.50 and $US2.

Behavioural economists interviewed by Yahoo Finance say suggested tips often lead people to leave more money because of the psychological differences between paying with cash versus a card. It can seem “cheaper” to pay more with a card because you aren’t actually reaching into your wallet to find the cash.

By extension, when you tip with credit instead of dollar bills, you might feel less attached to the extra money you’re paying. That means if a credit machine suggests tips of 15%, 18%, and 20%, you might be more likely to leave the highest one.

“The machine makes the process easy and painless, setting the perfect ‘trap’ for customers,” the article explains.

Read the full story on Yahoo Finance here »

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