Page 35 - GS221202

Education

Help merchants navigate holiday-time tipping

transaction could be charged back by the card issuer or
cardholder. With tipping at the time of sale, if the bill
is $100 and the customer tips another $100, the card is
authorized for $200—without invoking the 20 percent
overage rule and eliminating that extra trip to the POS. A
win-win.

Merchants can avoid an over-tip chargeback by having a
server present a bill and let the customer write in the tip,
then walk back to the POS (assuming the merchant doesn't
have pay-at-table technology) and enter the entire amount
By Allen Kopelman of the sale, including the tip, to avoid the 20 percent
Nationwide Payment Systems Inc. tolerance rule by having the entire amount authorized.
Cashier checkouts are another great workaround.
assive tipping is on trend, especially dur- Customers go to a cashier, and the terminal adds the tip at
ing the holidays when people remember
front-line workers and service profession- the time of the sale. This is a great option for restaurants
M als. Every year, around this time, customers that may not have pay-at-table devices.
leave big tips to express their gratitude to delivery drivers, Another technology solution would require issuers to
stylists, restaurant workers and sales associates. In many
cases the tips are higher than the entire bill. While servers use SMS messaging to send a text message or SMS to
cardholders asking if they meant to tip more than 20
appreciate the goodwill from these generous tips, business
owners run the risk of getting a chargeback when the total percent and then approving the amount.
bill exceeds an original authorization. Don't leave hard-earned money on the table
Chargebacks can be frustrating for merchants, especially The 20 percent tip variance has caused headaches up and
card-present business owners who are doing face-to- down the commerce value chain. And with the old-school
face sales. High tips can be problematic for retailers, way, it's not just tip money that's lost. Let's do the math:
restaurants, bars, nightclubs, salons and other venues • $10 bill – customer leaves $30 – chargeback is for $30
where customers tip wait staff. or $10

Avoid high costs of high tipping • The funds are lost – $10
The 20 percent variance rule, established by Visa and • Time is lost writing a letter and faxing or uploading
Mastercard, has existed for as long as I can remember, documents to a chargeback department is lost.
going back to when I joined the merchant services trade • Time spent cursing and complaining is lost.
in 1998 and began offering payment processing services • Medical bills are incurred when you throw out your
through my own ISO in 2001. Through the years, I've seen
this issue come up repeatedly, and I've helped all types of back after tossing your PC across the room when
you receive a $25 to $35 chargeback fee on your
merchants avoid high-tip chargebacks.
merchant statement.
Proven workarounds will keep your merchants, waitstaff • Total losses exceed the $10 transaction and $25 to
and customers happy. One such workaround is to tip at $35 chargeback fee, not to mention the aggravation.
the time of sale. When business owners enable tipping • Then imagine this scenario happening five to 10
at the time of the sale, they bypass the old-school pre- times a month: 5 times in a month, $35 x 5 = $175; 10
authorization method that only allows up to a 20 percent times a month, $35 x 10 = $350
gratuity. This saves time for the server and customer and
protects the merchant from chargebacks. Business owners need to adapt to many things; this is
one of them. It's time to change how you handle this as
Here's how it works: The terminal prompts for a tip and a business owner or payments industry professional.
the entire amount is authorized. This eliminates any risk
of a chargeback, even if the tip is enormous.
Allen Kopelman, a serial entrepreneur, is co-founder and CEO of
Consider the old-school way, which was to present the Nationwide Payment Systems Inc. and host of B2B Vault: The Payment
check, which has been pre-authorized by the terminal, Technology podcast. Email him at allen@npsbank.com, and connect on
and have the customer write in the tip. Then take it back LinkedIn https://www.linkedin.com/in/allenkopelman/ and Twitter @
to the POS. If the customer has written in a $30 tip, that AllenKopelman.

35