Encouraging Tips Through Card Payments: The Power of Nudging

Card readers in German bakeries and cafés increasingly ask customers if they would like to leave a tip, a practice influenced by U.S. customs. Reactions vary, with some feeling uncomfortable declining while others view it as unnecessary. Economists suggest this trend may lead to higher tipping averages due to social pressure. While tipping is common in countries like the U.S., it raises questions about its relevance in Germany, where a legal minimum wage exists.

Card readers prompting for tips are on the rise, a trend that has its roots in the United States, where tipping customs vastly differ from those in Germany. But is this practice truly warranted here?

“With card, please!” It’s a familiar phrase, but before customers can settle their bill for breads or pastries at a bakery in Upper Bavaria, they are met with a question: “Would you like to leave a tip?” The options presented are a green five or ten percent tip, while “no” is glaringly displayed in red.

Responses from patrons vary significantly. One customer states, “I just hit no because I don’t see the reason to tip.” In contrast, another shares, “Saying ‘no’ feels a bit rude, so I do leave something.”

A self-service café close to Munich’s main train station also features this “automatic tipping” system, offering customers the chance to tip five, ten, or even fifteen percent.

The Tipping Debate

A student, while making her purchase, opts for the middle option. She has never found the tipping prompt bothersome. “I was raised to understand that in Germany, tipping ranges from five to ten percent,” she explains. Thus, she finds it almost natural to have the option for tipping during card transactions.

However, not everyone shares this view. An older customer describes the prompt as “intrusive,” especially since she collected her order directly from the counter. “I didn’t think a tip was warranted, so I didn’t leave one,” she remarks.

Tanya Naughton, the managing director of the café, sees the tipping function as beneficial. “People actually tip more regularly!” she declares. The tips collected via card payments are summed daily and, along with the cash from the tip jar, are distributed to employees at the end of each shift.

In countries like the USA, Australia, and England, tipping is a deeply ingrained practice. “That’s why it makes perfect sense for us,” Naughton states, especially considering the influx of tourists who may not carry cash.

Understanding Tipping Trends

In the United States, tipping amounts can reach up to 20 percent, though customer dissatisfaction with this norm is on the rise.

According to Klaus Schmidt, an economist from Ludwig Maximilian University of Munich, the tipping prompt generally favors service providers. “By offering multiple options, customers often avoid the lowest choice to not seem stingy, and they might select a mid-range tip instead,” he explains. This behavioral tendency might encourage tips of ten percent more frequently than five, as people naturally lean towards the middle ground.

Schmidt refers to this influence as “nudging.” Depending on context, this nudging can be seen as either justified or intrusive. The economist notes that some individuals find it more challenging to resist this subtle pressure. “When it is suggested that tipping is the norm, a considerable number of people will comply, even if they think a tip isn’t necessary,” he adds.

The Minimum Wage Context in Germany

Schmidt critically assesses the adoption of American tipping practices in Germany, where a legal minimum wage exists. “Germans typically tip more generously compared to other countries,” he points out. In the U.S., service workers often earn low base wages, relying heavily on tips for their income.

This cultural shift in tipping habits might also be noticeable in Germany, although the tipping customs differ. “This trend could potentially alter traditional practices due to this new system,” Schmidt concludes.

This topic was covered by BR24 on January 25, 2025, at 05:44 AM.

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