Podcast Summary: The Future of Tipping with Kickfin and Mastercard

Episode: The Future of Tipping with Kickfin and Mastercard
Host: Chip Klose
Release Date: December 9, 2024
Guests:
  - Justin Roberts, Co-founder of Kickfin
  - Joe Zelzer, Senior Vice President and Head of Money Movement Solutions for Mastercard North America

Introduction

In this insightful episode of Restaurant Strategy, host Chip Klose delves into the evolving landscape of tip management within the restaurant industry. Aimed at independent restaurant owners striving to enhance profitability, the discussion centers around innovative solutions for tip collection and disbursement. Chip is joined by Justin Roberts from Kickfin and Joe Zelzer from Mastercard, both of whom bring invaluable expertise to the conversation.

Guest Introductions

Justin Roberts introduces himself as the co-founder of Kickfin, a company dedicated to simplifying tip management for restaurant operators. He emphasizes Kickfin's mission to ensure employees receive their gratuities accurately and directly into their preferred bank accounts, eliminating the complexities associated with traditional cash-based systems.

Joe Zelzer represents Mastercard, overseeing Money Movement Solutions for the North American region. His role encompasses real-time disbursement capabilities, cross-border services, and bill payment solutions. Joe highlights the significant growth in digital tip transactions, noting a 550% year-over-year growth rate in tipping through electronic means.

Challenges in Traditional Tip Management

Chip opens the discussion by reflecting on his early management experiences, underscoring the critical importance of handling employees' money with utmost care. He shares anecdotes of the cumbersome nature of cash-based tip disbursement, where managers and staff spent excessive time managing cash, leading to inefficiencies and potential security risks.

The Shift to Digital Tip Management

Justin Roberts elaborates on the evolution of tip management from manual calculations and cash distribution to automated, digital solutions. He explains how Kickfin leverages data from point-of-sale (POS) systems to apply tipping rules and facilitate instant, cashless tip payouts directly to employees' bank accounts. Justin highlights that 90% of venues still rely on physical cash, emphasizing the need for modernization.

Joe Zelzer concurs, emphasizing the rising consumer expectations for speed and security in financial transactions. He points out that over 85% of restaurant transactions are now paid electronically, reducing the reliance on cash but still leaving room for manual tip payouts, which are inefficient and prone to errors.

Benefits of Kickfin and Mastercard's Solutions

The conversation pivots to the core benefits of adopting digital tip management systems:

1. Speed

• Justin Roberts boasts that Kickfin enables tip payments 24/7/365, ensuring employees receive their tips instantly, even during holidays when banks are closed.
  • “The money is presented immediately after the shift ends, so employees can access it without delay.” [22:07]
• Joe Zelzer adds that real-time payments meet the high-speed expectations of today’s workforce, comparing the immediacy of Kickfin's solution to the rapid payout systems used by gig economy platforms like Uber and DoorDash.
  • “Employees expect to be paid quickly, and our solutions deliver that seamlessly.” [20:26]

2. Employee Choice

• Justin Roberts emphasizes the importance of allowing employees to choose their preferred banking institutions, avoiding the limitations of pay card systems that require additional financial relationships.
  • “Employees should have the autonomy to receive their tips directly into their existing bank accounts, not be forced into third-party pay cards.” [30:00]
• Joe Zelzer underscores that 81% of employees are willing to switch jobs for instant wage access, highlighting the competitive advantage restaurants can gain by offering such flexibility.
  • “Providing choice in how employees receive their tips is crucial for attracting and retaining top talent.” [26:48]

3. Security

• Joe Zelzer articulates the security benefits of digital tip management over cash handling, which is susceptible to theft, human error, and operational inefficiencies.
  • “Digital solutions like Kickfin reduce the risks associated with cash, such as theft and the burden of manual calculations.” [35:05]
• Justin Roberts shares personal experiences illustrating the dangers of handling large amounts of cash, reinforcing the necessity for secure, digital alternatives.
  • “Dealing with cash tips late at night was not only cumbersome but also posed significant security risks for both employees and managers.” [37:57]

Implementation Insights

Justin Roberts discusses the practical aspects of integrating Kickfin’s solutions into existing restaurant operations. He advocates for a phased approach, starting with eliminating cash and moving towards full digital integration with POS systems. Justin highlights successful implementations, such as Bar Louis, which saved managers nearly two hours daily by automating tip calculations and distributions.

• “More than 60% of our implementations now integrate directly with POS systems, streamlining the entire tip management process.” [40:06]

Real-World Impact

The episode presents compelling statistics and case studies demonstrating the tangible benefits of digital tip management:

• Transactional Growth: Tipping through digital means has seen a 550% increase year-over-year.
• Employee Financial Stability: With 78% of Americans living paycheck to paycheck, instant access to tips can significantly alleviate financial stress.
• Operational Efficiency: Restaurants like Bar Louis have reported saving up to two hours daily, which can be redirected towards enhancing profitability and customer service.

Final Thoughts

As the conversation wraps up, both guests emphasize the transformative impact of digital tip management on the restaurant industry. Joe Zelzer reiterates Mastercard’s commitment to fostering secure, efficient financial solutions that meet the evolving needs of both employers and employees.

Justin Roberts expresses gratitude for the partnership with Mastercard, highlighting the enhanced security and trust that comes with integrating Mastercard’s robust payment infrastructure with Kickfin’s innovative software.

Chip Klose concludes by underscoring the importance of adopting such technologies not only for operational efficiency but also for employee satisfaction and retention. He draws parallels to historical examples, illustrating how recognizing and marketing the benefits of modern solutions can turn potential challenges into strategic advantages.

Notable Quotes

• Chip Klose on the importance of handling money responsibly:
  “You cannot mess with people's money. They will not stand for it, nor do we want to.” [06:01]

• Justin Roberts on bypassing traditional banking for tip distribution:
  “Whether I'm at a local credit union, Bank of America, Wells Fargo, you name it, I can choose.” [19:36]

• Joe Zelzer on consumer expectations for real-time payments:
  “Employees expect to be paid quickly, and our solutions deliver that seamlessly.” [20:26]

• Joe Zelzer on the security risks of cash:
  “Digital solutions like Kickfin reduce the risks associated with cash, such as theft and the burden of manual calculations.” [35:05]

• Justin Roberts on the efficiency gains from Kickfin:
  “Eliminating cash, we're solving 90% of the issues, and now we're relying on the system to handle the rest.” [37:57]

Conclusion

This episode of Restaurant Strategy provides a comprehensive exploration of the future of tipping in the restaurant industry. Through engaging dialogue and expert insights from Kickfin and Mastercard, listeners gain a deep understanding of the challenges associated with traditional tip management and the transformative potential of digital solutions. By embracing technologies that prioritize speed, choice, and security, restaurant operators can enhance operational efficiency, meet employee expectations, and ultimately drive greater profitability.

For restaurant owners interested in modernizing their tip management systems, the episode offers actionable insights and encourages exploring solutions like Kickfin to stay ahead in a competitive industry.