How to Implement Cashless Tipping Solutions for Your Business

Jan 17, 2025

14 minutes

Contents

1. Benefits of Cashless Tipping
2. Failures, limitations
3. Types of digital tipping solutions
4. Key features and integrations for digital tipping
5. How to develop digital tipping solution
6. FAQ

Imagine that your guests have had an excellent experience when they visit your establishment. But at the very end, they face that awkward moment when they realise they don't have the cash to thank the waiter or other professional. According to the DepositAccount survey 73% of Americans carry less than $50 in cash at any given time and 66% don't carry any cash at all. Tipping doesn't increase your revenue, but it does increase employee engagement and performance. It also creates a strong emotional bond between your guests and your business. And loyal customers regularly spend 43% more on services to which they are loyal.

From QR code payments to mobile apps, cashless tipping solutions are making it easier than ever to show appreciation for great service. Whether you're in a restaurant, salon or hotel, cashless tipping has become the new normal for both customers and service providers.

Let's explore how this modern approach is changing the hospitality landscape. In this article you will learn:

What is digital tipping and what are its key benefits and limitations?
What types of cashless tipping are being developed?
What integrations and features are important to consider when launching a solution?
How to develop a digital tipping solution?

Benefits of Cashless Tipping

Digital tipping has revolutionised the way service industry workers receive tips, bringing significant benefits to businesses, employees and customers alike. The adoption of digital tipping will become increasingly important as consumer payment preferences evolve.
In 2024, as in 2022, 55% of consumers will prefer to pay with cards and other non-cash means, according to the latest research from the European Central Bank (ECB).

The proliferation of digital payments touches every aspect of customers' lives. According to a Forbes Advisor survey, 73% of US respondents said they leave at least an 11% tip when prompted by a cyber device, and 65% admitted to leaving more in these scenarios than when leaving cash. In fact, some businesses have reported up to a fivefold increase in staff tips after implementing cashless solutions.

More about the different payment methods

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And here are some of the benefits that both the business and the customer have experienced after implementing cashless tipping.

Customer convenience

From a customer perspective, digital tipping solves a common problem – nearly 40% of hotel guests surveyed said they carry significantly less cash than they did five years ago. This often leads to feelings of embarrassment and frustration, which can affect the overall customer experience and make them think about how to tip without cash.

Detailed earnings tracking with instant access

For service staff and the hospitality industry, digital tipping offers unprecedented financial transparency and control. Every transaction is recorded electronically, ensuring accurate tracking and fair distribution of tips. This transparency builds trust between employers and employees, and personal dashboards allow staff to monitor their earnings in real time. The financial benefits are particularly compelling.

Streamlined operations and processes

For business operations, digital tipping reduces the administrative burden. Managers save valuable time previously spent on cash handling and bank runs. The system also offers comprehensive tracking capabilities, allowing businesses to monitor service quality through tip patterns and customer feedback. However, it is important to consider bank charges and taxes on transfers.

Improved tip distribution accuracy

The security benefits are also significant. Digital solutions eliminate the risks associated with cash handling, including theft and loss. This improved security extends to employees, who no longer need to carry large amounts of cash after their shifts, which is particularly beneficial for those who work late.

Automated tax reporting and compliance

The implementation of digital tipping has become increasingly important as consumer payment preferences evolve. In recent years, there has been a notable shift towards cashless transactions, with seven out of ten adults stating that tipping is expected in more places today than five years ago. This trend has accelerated with the widespread adoption of digital payment systems, making cashless tipping solutions an essential tool for modern service businesses.

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Failures, limitations and tech issues

Digital tipping has its advantages, but it also has its limitations. Let's take a look at some of the problems you may face and how you can avoid them:

Technology Dependency – issues such as insatiable internet connectivity and out-of-date devices can disrupt the tipping process. Think about integration failure notifications and other reminders to thank them for their service;
Delayed Payouts – a delivery driver using a tipping platform may have to wait 1-3 business days for funds to be transferred. Choose the provider with the fastest processing time;
Limited Anonymity – digital transactions often require personal information such as email addresses or phone numbers. Link the system to electronic wallets such as Apple Pay and Google Pay for instant payments.

Cashless tipping systems need to address these limitations through inclusive, efficient and transparent processes to ensure widespread adoption and satisfaction.

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Types of digital tipping solutions

Depending on various factors, companies can use both custom solutions and off-the-shelf integrations to leverage digital tipping. In the US, the market is currently being driven by fintech startups such as eTip, Kickfin, TipYo, Grazzy and Buku. Choosing the right option will depend on the size and architecture of your business.

Scan a QR code

Customers can scan a unique QR code displayed on a receipt, at the point of sale or on a special tipping card. Once scanned, the QR code directs users to a secure payment page where they can select the tip amount and complete the transaction.

Payments are processed directly through linked digital wallets (e.g. Apple Pay, Google Pay) or payment gateways (e.g. Stripe, PayPal). Funds are either sent to a collective pool for distribution to staff or directly to the tipped individual's account, depending on the setup.

✍ Example: eTip, used by hotel chains such as Hilton, allows guests to tip housekeeping staff by scanning QR codes placed in rooms. Payments are sent directly to the employee associated with the QR code.

When building a restaurant aggregator, Foodclick , we implemented a number of functions via QR code scanning – when visiting a restaurant, the user could open the menu, order the desired dishes and pay for the order within the application, as well as leave a contactless tip using the associated card.

In-app feature

Businesses can integrate a tipping feature directly into their mobile or web app. Customers can add a digital tip during checkout or when reviewing their service experience. This feature is often linked to a loyalty programme or order history for a seamless user experience.

Tips are added to the total order amount and processed through the app's existing payment system. Funds are allocated and disbursed based on pre-set rules, either directly to individuals or to a shared tip pool.

✍ Example. Delivery apps such as DoorDash or Uber Eats allow users to tip drivers or riders in-app after their orders are completed, and offer suggested tip amounts for convenience.

Additional option

A tipping prompt is displayed on the card reader or POS terminal during the payment process. Customers can choose from suggested tip percentages or enter a custom amount before completing their transaction. It can also be implemented in a self-order kiosk user flow as a final step after the purchase process is complete.

The tip amount is processed alongside the total bill in a single transaction, eliminating the need for separate payments. The system then tracks tips and allocates them to the appropriate employee or tip pool.

Learn more about the necessary features for restaurant app development

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✍ Example. Square POS offers integrated tipping options on its payment terminals, which are widely used in coffee shops and bakeries such as Blue Bottle Coffee. Customers can quickly add a tip when paying with their card, making the checkout process seamless.

We fully automated the table booking process for a restaurant that serves over 2,000 diners a day. As well as choosing the right seat, customers were able to pre-order food and leave tips online. The special feature of the solution is that it is integrated into the overall architecture of the service system: information about the order, including the customer's thank you, is consistently fed to the relevant parts of the POS system, making the processes transparent and centralised.

Restaurant and brewery Druzya

We've automated the workflows for place reservation and kitchen load control, developed a website with an admin section, and replaced all the programs within the restaurant.

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Separate solution

The need for users to be able to leave cashless tips can be met by launching a separate app with this functionality that restaurants, hotels and other businesses can connect to. Restaurants can connect to the app as aggregators and appear on the shared menu. Payment can also be made by scanning a QR code in the restaurant, hotel or salon itself. The solution can be implemented on the web, as a mobile app or as a mini-app in messenger.

Such a system needs to process a large number of transactions in real time, so it is better to use cloud servers for data storage. In addition to security issues, you should also provide for automatic debiting of the service's commission. For the convenience of your employees, you can add to a cashless tipping app an automatic calculation of the net profit including tax, which can also be held in a separate account before payment in the reporting period.

✍ Example. Kickfin, used by restaurants such as Chick-fil-A, provides a standalone digital tipping platform for staff. Managers share a Kickfin link with customers via receipts or digital communications, ensuring that staff receive their tips instantly and securely.

Here is our vision of how an online tip mobile application could look like

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Key features and integrations for digital tipping

Launching a successful digital tipping solution requires careful consideration of the integrations and features that will improve usability, security and efficiency for both businesses and customers. Here are some key elements it can include.

George A.

Business Manager

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Payment Gateway Integration

Ensure seamless integration with secure and widely used payment gateways such as Stripe, PayPal or Square. This will allow customers to tip using their preferred payment methods, including credit cards, digital wallets (e.g. Apple Pay, Google Pay) and bank transfers. If you are using integration with a third-party service, make sure you have automatic commission withdrawal.

More about the specifics of working with web payments

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POS System Compatibility

Enhancing your POS system with digital tipping options can simplify the checkout process for customers by making it easy to leave a tip when paying by card. For restaurants or hotels, this will ensure smoother transactions by integrating tipping with regular payments. Check if your current POS system supports this feature. If not, consider upgrading to systems such as Kickfin or Clover that are designed for seamless tipping integration.

The POS can also provide real-time analysis of tip trends, employee performance and customer preferences. It helps to optimise operations, improve employee engagement and create personalised customer experiences.

Types of POS Systems: How to Choose and Implement the Right Solution for Your Business

In this article, we'll tell you where to start when choosing a POS system, how to use its features to improve your business, and how to keep up with the latest trends in the food tech industry.

Read our article

Employee profiles

Set up a feature in the admin panel to create staff profiles to associate a specific specialist with the order they are serving. This can be done automatically by scanning a QR code or from the backend when creating a new order in the POS system. The employee's payment card details are also linked to the profile, with money transferred directly to separate payment streams.

You can also include features that allow companies to manage tip distribution, whether tips go directly to individual employees, to a shared pool, or a combination. Customisable allocation ensures compliance with company policies and employment laws.

Extended feedback

In addition to financial rewards, add the ability to leave comments and rate the service provided. This will help identify the best staff and highlight processes that need improvement. Visitors themselves will also see feedback on specialists and sign up for services. At the same time, it is important to provide a comment moderation system to avoid insults and unethical content that can demotivate staff. For more on the impact of working with customer reviews, click here.

Here is our approach to working with cashless tipping

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Easy tip percentage selection

Develop an automatic tipping system based on the total amount of the order. Integrate this feature into your overall order payment logic and encourage your customers to tip through intuitive prompts via the UI/UX in your website or app interface. For example, you can offer multiple options expressed as percentages with specified amounts. And don't forget to include the option to decline a tip.

Explore the latest trends in UI/UX and scenarios for applying them to your website or app

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How to develop digital tipping solution

Here is a step-by-step guide to develop cashless tipping software that meets the needs of both your staff and your customers.

Define The Type

Identify your target audience and analyse their user flow to find the step where it is appropriate to implement a tipping option. Decide on the tipping scenarios: in-app, QR code-based or POS integration. Clarify whether you need individual or collective tip allocation and instant payout options. Understand compliance requirements, including local employment and tax laws.

Conduct Market Research

Study competitors such as eTip, Kickfin and Grazzy to identify market trends through secondary research. Understand compliance requirements, including local labour and tax laws. Conduct surveys to gain insight into customer preferences, such as preferred payment methods and tipping habits.

Choose a Development Approach

You have two options here:

Custom Development – build a tailored solution to meet unique business needs;
Off-the-Shelf Integration – use existing software with APIs to add tipping functionality.

Select Payment Gateways and Integrations

Integrate secure payment gateways such as Stripe, PayPal or Square and ensure compatibility with your POS system. For large chains and enterprises, it's important to incorporate multi-channel options such as mobile apps, web platforms and QR code scanning.

Implement Key Features

Tipping options – include flat rates, percentage tips or custom amounts;
Tip allocation – allows for customisable allocation (individual, pooled or hybrid);
Analytics – provide insight into tipping trends and employee performance;
Security – implement PCI DSS compliance, data encryption and fraud detection.

Launch and Support

After release, make sure you train staff on how to use the system and communicate its benefits to customers. For example, you can provide in-app onboarding or create FAQs to help to adapt.

Update features and integrations based on analytics that track tipping trends and identify areas for improvement, and ensure scalability to accommodate business growth or new scenarios. And don't forget to stay compliant with new regulations and security standards.

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FAQ

How does digital tipping work?

Digital tipping allows customers to tip electronically instead of using cash. This can be done in a variety of ways, including scanning a QR code, using an in-app feature, or selecting a tip option on a payment terminal. These tips are securely processed through payment gateways and sent either directly to the intended recipient or to a pool, depending on how the business is set up. For example, a restaurant can distribute digital tips to staff based on hours worked or role.

What is online tipping?

Online tipping is the process of leaving tips via digital platforms or apps. This is typically done when paying online for services such as food delivery, ride-sharing or freelance work. Customers can add a tip during checkout or payment, often selecting a percentage of the total bill or entering a custom amount. Online tipping is integrated into services such as Uber Eats or DoorDash, making it convenient for customers and ensuring fair compensation for service providers.

What is the cashless tipping system?

A cashless tipping system allows customers to tip staff without using physical cash. This system uses digital technology such as mobile apps, QR codes or payment terminals. For example, a hairdressing salon could use a QR code at each station to allow customers to tip their stylist directly from their phone. These systems are secure, fast and adaptable to different business models, eliminating reliance on cash while providing transparency for employees and employers.

What is the cashless tip system?

The cashless tipping system is a modern approach to tipping that allows customers to tip using digital payment methods instead of cash. It integrates seamlessly with POS systems, apps or QR code setups. For example, a ride-hailing service could include a tipping option in its app at the end of the trip. These systems are particularly beneficial for businesses that are transitioning away from cash, ensuring that employees continue to receive tips while improving convenience for customers.

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