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Chip & PIN news and developments continue to be a hot topic within the industry, as new software is introduced and sector specific issues are addressed.
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The Times, 24 September 2005
Why Chip and PIN means tips are thin
Handheld consoles leave customers confused over best way to show their appreciation. CHIP and PIN, the payment system introduced to stamp out plastic card fraud, has claimed an unintended victim, the restaurant tip. Whereas the old signature system left diners with a blank credit card slip, at liberty to ruminate over coffee and cigars as to the appropriate level of gratuity to leave, the new handheld chip-and-PIN consoles force customers to make an instant decision, under the nose of the waiter. As a result, the British Hospitality Association (BHA) says that tips have fallen by as much as 15 per cent since October 2003. Bob Cotton, chief executive of the BHA, which represents 40,000 hotels, pubs and restaurants, said: "Fewer people are leaving tips, and that is because the waiter has to ask a customer whether they would like to add a tip. People feel uncomfortable being asked."
Waiters can expect to earn up to 65 per cent of their income through tips, which can be in excess of £200 a week at top London establishments. Under the chip-and-PIN system the waiter inserts the credit or debit card into a handheld console before turning it back to the customer to enter a PIN. The console, which restaurants lease from their bank for around £20 a month, immediately asks for a decision on a gratuity, prompting diners either to tap in a figure, in the presence of the waiter, or hit the "clear" button. Although larger restaurants and chains can avoid awkwardness by imposing service charges, the smaller, family-owned restaurants are losing out. La Capannina, in Soho, Central London, moved to chip and PIN in March. Paolo Frattini, the owner, said: "With the old system there was a double slip of paper that the customer signed, put the gratuity on, and it went back to the till. It was so easy.
"With this new nightmare you have to slap this thing in their face that says 'do you want to leave a tip?', not even 'would you like to leave a tip?'. "I can't ask the customer for a tip because it's not in the nature of our business. Before, it was more discretional. Now it's very impersonal, and so our tips have gone down."
Restaurateurs at other Soho establishments told the same story. At Taro, a Japanese restaurant on Old Compton St, Yujiro Suzuki, assistant manager, said: "We've used chip and PIN since January and we're getting fewer tips." Peter Palia, acting manager at Il Siciliano, on Dean St, said: "The problem is that when you use the machine, it comes to a point - tip or no tip - and that's not very nice for the customer."
In Chinatown, Amy Chow, assistant manager of Lee Ho Fook, said: "We started quite recently, and I've noticed that we're getting fewer tips. I don't know what it is, but at least we know it's more secure." The latest industry figures show that of the 140 face-to-face card transactions that take place every second, 85 are PIN verified. That figure is set to rise further, as every new card issued is now chip and PIN ready, with the exception of cheque guarantee cards and cards for people with some disabilities.
Sandra Quinn, of the Association of Payment Clearing Services, which represents card issuers, said: "The feedback we've been getting is that tips in restaurants are down. What is maybe needed is a change of practices. Waiters should leave customers with the terminal and give them some privacy."
Connie Penn agrees that a change of practice is required, but does not believe that should revolve around leaving terminal lying around tables and thus necessitating the purchase of even more devices. She says "From the beginning our belief has been that the change should be in the bill preparation process rather than in the card payment process.
From our perspective gratuity has nothing to do with the card payment process, because the decision to leave a tip equally applies when cash and cheques are used to pay the bill. When the bill is produced it should carry the gratuity narrative. Then it can be given to the customer who can "ruminate over coffee and cigars as to the appropriate level of gratuity to leave" then when ready the gratuity can be add to the bill and then the customer can indicate the method of payment.
I was involved with the development of the first gratuity process on the Fortronic [now Ingenico] card terminals in 1987 with Barclaycard. I felt then that it was a strange move to add the gratuity to the card payment process, but it appeared to be something the restaurant industry wanted in their card payment terminals. This process definitely needs to be reviewed in the view of the current research."
By Patrick Foster