We’re now in the post-EMV liability shift era, and this is the “real” start of EMV implementations in the U.S. Considering the size and complexity of payment systems right now, I think the U.S. is doing pretty well. Small and medium-sized merchants are still taking longer to migrate but are on the right track. However, the restaurant industry seems to be rampant with misinformation and myths regarding the future of payments. One such topic is tipping in full-service restaurants. Let’s take a look:
The tipping conundrum
With Pay-at-the-Table solutions arriving in the restaurant space, there is a common misconception among owners about tipping. Some restaurant owners believe the tip amount must always be included in the authorization amount. They also believe that they no longer have to adjust the tip back into the POS system once they get the signed receipt from the diner.
How tipping works and what’s going to change
A lot of how the tip is included in the final bill depends on the cardholder verification method (CVM). Transactions that are verified with a signature may still be adjusted after the customer has paid, similar to how it is done today. If the CVM is chip & PIN, and a Pay-at-the-Table solution is in use, a tip should be included in the authorization amount. However, if the restaurant is using a traditional EMV-enabled payment solution with chip & sign as the CVM, a tip can be included either in the authorization amount or adjusted later.
The underlying principle for the chip & PIN method is the fact that the PIN acts as the customer’s verification of the amount, including the tip. Since the customer won’t be signing a receipt when a PIN is used, the tip amount needs to be added before the PIN is entered on the payment device. Similarly, in a chip & sign method, a customer signature is collected after they have entered the tip amount on the receipt.
Restaurants that determine a need for liability protection for lost/stolen cards need to implement PIN support. The best practice for PIN support in full-service restaurants requires that the payment device be taken to the table for the customer to enter the tip and their PIN to process the transaction. There are multiple form factors for payment devices that support Pay-at-the-Table, including traditional wireless smart terminals and mobile devices with EMV chip & PIN readers.
How restaurants can prepare for the change
Restaurants willing to accept the risk of stolen card liability do not need to support chip & PIN. They can continue to adjust the tip on all transactions as they currently do today. However, they should keep in mind that, as restaurant customers become more aware of the protection that chip & PIN provides, they will start to expect to be able to pay using this method. By accepting EMV chip & PIN transactions with a Pay-at-the-Table solution, merchants protect themselves from any chargebacks and their brand’s reputation because the card never leaves the customer’s sight during the payment process.
I hope this blog post has been helpful. Feel free to submit more questions in the comments section or on our Ask an Expert page.
Allen Friedman is the Vice President of Payment Solutions at North America / Ingenico Group
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