Why tipping with Apps Like Venmo Is Bad for Business
On the surface it seems like the quick and easy solution to tip servers, stylists and other customer service professionals. There are plenty of customers and employees using peer-to-peer apps for payments and tipping who don’t see a problem with it. However, there are reasons apps like Venmo or Cash App aren’t the way to go when it comes to leaving tips for goods and services provided.
The Movement Toward Cashless Tipping
Before the recent health crisis, we were already moving toward electronic payments for just about everything. People like being able to swipe or tap without having to dig in their wallet for cash or checks. Once the crisis hit, cashless transactions became the preferred way to do business for safety reasons and while some still prefer cash, it’s no longer the default.
One sticking point is tipping. While it used to be the norm for people to at least have a little cash on them for things like grabbing coffee or tipping, this is no longer the case.
While many businesses have adopted point of sale systems that allow for tipping where none existed before, there are still tipping opportunities for businesses who are not providing that option due to costs of implementation of a new system, complexity around accounting, and other reasons.
The need to tip electronically is essential to not only hard-working service employees, but businesses as well. Customers will become frustrated if they aren’t able to offer gratuities or if they feel they must use cash to show their appreciation for a job well done. This can lead to poor reviews and affect service quality.
For customers who don’t carry cash, apps like Venmo appear to offer a solution that allows them to tip their service provider, and this has become increasingly common. You see it in restaurants, resorts, salons, and other places where it’s customary to tip service providers to ask if someone has Venmo or PayPal or Cash App.
What Are the Downsides of Using Apps Like Venmo for Cashless Tipping?
Unfortunately, relying on peer-to-peer apps for cashless tipping isn’t a sustainable or smart solution for your business, your employees, or your customers.
Let’s start with one of the most basic reasons not to use Venmo or other peer-to-peer apps for tipping: Venmo is not a business app unless you set up a business account. It’s a personal app that allows users to send money to friends and family. Want to give your co-worker gas money for a ride to work, but you don’t have the cash? Venmo. Want to pitch in for a birthday present? Cash App or Venmo works great. Want to send money to your nephew out of state? Venmo and PayPal are wonderful. Venmo or Cash Apps are not meant to tip your hotel housekeeper, hair stylist, or airport shuttle driver.
One of the most common problems: both parties must have the app. If your customer has Venmo but your employee only has Cash App or PayPal, tipping suddenly becomes a complicated hassle. And more times than not, the tip opportunity will be passed. Not all employees use peer-to-peer money apps. Some employees feel receiving tips on these P2P apps compromises their privacy, but they don’t have other options for a digital tip.
Similarly, it can be frustrating for customers to have to juggle three or more different apps just to tip their service providers.
Peer-to-peer apps for tipping present issues with payroll and taxes. Not only that, but if you choose to adopt a communal tipping system, there is no way to do this when employees are receiving tips on their own apps. As an employer, you have no way to streamline the system, which makes more work for the hotelier and potential issues at tax time. Accepting tips using these types of apps is often in violation of policies, since income from tips must be reported.
The Questionable Safety of Peer-to-Peer Money Apps for Your Business
Apps like Venmo have a dubious reputation when it comes to privacy and safety. Protecting the personal information of your employees is an enormous responsibility and these apps simply don’t provide the security needed to do so. There are many cases where individuals have used the information gathered from apps to locate someone following a transaction. This alone is enough reason to pass on using Venmo or PayPal for tipping.
Privacy, safety, tax compliance and a consistent customer experience are important priorities for your successful business, and peer-to-peer payment apps simply don’t deliver this when it comes to tipping.
Is There an Alternative to Tipping with Peer-to-Peer Apps?
An easy and consistent tipping experience helps your business by helping your employees and your customers. Technology should never be a barrier for employees or customers. Customers shouldn’t feel that they can’t leave a tip because they don’t have cash or choose not to use cash. Employees shouldn’t feel undervalued or unappreciated or required to sacrifice safety and privacy to be tipped.
The solution is a tipping software solution that creates a seamless, secure method for tipping that is easy, consistent, and reliable. Dedicated, secure tipping software can revolutionize the way your business handles tipping and that is very good for business. See how youtip works in our demo today.