The Future of Tipping with Kickfin and Mastercard

Summary

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

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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.

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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]

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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.

Transcript

[Chip Close]

The world is changing. Our workforce is changing. What our workforce expects, demands of us is changing. Having a conversation today about that, specifically when it comes to tips, tip collection, tip disbursement. Speaking with the folks from Kickfin, also from mastercard, two heavyweights in this space, answering some of your toughest questions. Don't go anywhere. There's an old saying that goes something like this. You'll only find three kinds of people in the world. Those who see, those who will never see, and those who can see when shown. This is Restaurant Strategy, a podcast with answers for anyone who's looking. Hey everyone, thanks for tuning in. My name is Chip Close. You are listening to Restaurant Strategy. We do two new episodes every single week. Operations on Monday, marketing on Monday. Thursday. This operations episode must be Monday. Just so you know, I wrote a book. It's called the Restaurant Marketing Mindset. I travel all around the world giving talks, keynotes at different conferences, conventions, trade shows. I do these podcast episodes every week. You can find me on Instagram, you can find me on Facebook, you find me on TikTok. I also run something called the P3 mastermind. It's a group coaching program geared towards independent restaurant owners and operators who struggle with profitability. So they got a busy place doing a lot of revenue, just not seeing all of that revenue or enough of that revenue drop all the way to the bottom line. If that sounds like you, if you're ready for consistent, predictable 20% profits, then come join the program with over 150 independent operators from all over the country in that group. We have a bunch of different groups, everybody spread between them. But if that sounds like you, we should have a conversation. You start that conversation by setting up time on our calendar restaurantstrategypodcast.com schedule. You'll grab time to chat with either me or someone from my team. We'll get to learn more about you and your restaurant. We'll get to hear what's going on. You'll get to ask questions. So you better understand what we do and how we help restaurant owners. And let's see if you're a good fit that calls absolutely free. There's no pressure, but it's a great way to get to know each other again. RestaurantStrategyPodcast.com Schedule as always, that link is in the show notes. Now Torque understands that expectations for food service, sustainability and guest experience are higher than ever. That's why Torc provides products and services that help restaurants meet those demands. With more than 50 years of global food service expertise, Torque can help you Keep up with hygiene standards and food safety guidelines all all over your best ones in every single department. Foh Boh Restrooms drive thru. On and on from Express Nap. The world's favorite napkin dispenser. I love it. You love it. I'm sure you see it. Sure you use it to the multipurpose cleaning towels that clean smarter and high capacity restroom dispensers that red run outs. Torque offers better hygiene for better guest and staff experiences. You can check them out and get more tips@torque USA.com Restaurant that's T O R K U S A.com Restaurant as always, you'll find that link in the show notes. Okay, so on today's episode, right, we're talking about modern tip management, really specifically diving into the three fundamentals for smarter tip distribution. It's something that every owner and operator should know, especially at the independent level. I'm thrilled to welcome back Justin Roberts, who's the co founder of Kickfin, one of the sponsors here of this program and a great guest every time he's on. Justin, welcome back.

[Justin Roberts]

Chip, great to see you. Thank you.

[Chip Close]

And we also are joined by Joe Zelzer. Joe is the senior vice president and head of Money Movement solutions for the North American region at MasterCard. Joe's going to explain what that means and what he does in just a minute. But Joe, welcome. It's good to have you as well.

[Joe Zelzer]

Yeah, thank you very much, Chip. Glad to be here.

[Chip Close]

Okay, so we have had some version or we've talked about parts of this. Justin, obviously this is not your first time on the show, so it's great to welcome you back. The best part about having guests on the show, bringing them to the audience, is that you guys have unique perspectives and insights because of sort of the, the rooms you get to be in, the way you get to peek behind curtains. So I'm excited to bring all of your learnings to the audience here. There's a lot we're going to get into and again, the whole idea, the whole piece of this conversation is about tip management. It's a new world. Technology is moving faster and making it easier, more effective, more efficient than ever before. So we're going to get into all of that. So to everybody listening, that's the point of today's conversation. Justin has a unique point of view to bring to this. So does Joe. Before we get into the nuts and bolts of what we're actually going to talk about, I want to, I want to give you guys both a chance to properly introduce yourself, really give some Context for the listeners who are tuning into this episode, Justin, again, tell us who you are, what you do, why you do it. You know, give some, give some frame of reference to the, to the audience.

[Justin Roberts]

Absolutely. Justin Roberts, co founder of Kickfin we manage the most important time of the day and multiple times a day for operators, which is ensuring that their employees receive their tips accurately and correctly and directly to their bank of choice. So we take all the complexity out of managing gratuities and we make it really easy for operators to find a way to send that money to those employees instantly and directly. So we feel lucky to be in this space because we think it's the most important part of the day that they have to manage and yeah, feel lucky to be serving the hospitality industry.

[Chip Close]

We're going to get into some of the complexities as the conversation goes on, but I was told very early on when I was, when I started managing restaurants that you can screw up a bunch of things. You cannot mess with people's money. They will not stand for it, nor do we want to. But it was like it was drilled into me when I was like 24, my first management job. You could screw up a lot of things and I'd be okay with it. You can't mess with people's money. And there were other words and language wedged into that statement that I'll spare the audience here, but it was, there's, there's very little that I've come across that's any truer than that. Joe, please, same thing, same question to you. Give us, give us some context, who you are, what you do and maybe you can start talking a little bit more about the partnership that you guys have with Kickfin.

[Joe Zelzer]

Yeah. So thank you, Chip. So as you said, I'm senior vice president, head of money movement solutions at MasterCard for our North America region. And what that really means is our money movement solutions are made up of real time disbursement capabilities, our cross border services, which includes sending remittances to potentially home country. It could be B2C type payments, B2B. And I also lead all of our bill payment capabilities. So that's think of going into your bank account and literally paying your bills to telco, credit card bills and whatnot. Excited to be here and look forward to our discussion on real time payments in hospitality industry with one of our key partners, Kickfin. So the Kickfin partnership has been great for us. We see this as an emerging vertical that's really growing rapidly. When we look at year over year growth, the Transaction growth rate of tipping specifically is over 550%. So it's an extremely high growth, high focus area for MasterCard. As we look at our disbursements.

[Chip Close]

It's so funny when you think about what you do, Joe, and sort of the department, the world that you live in and oversee. Like 20 years ago that wasn't a thing. Like it was just think about bill paying and you know, I just paid my first bill. There's a bill that had to be paid by mail, by check. And I was like, what? Can I just set up auto payment? See, yeah, that's really not how we do it here. I was like, literally I just said what I don't understand because it's gotten so, so easy over the last many, many years.

[Joe Zelzer]

Yeah, yeah. I think it's like all. We see this right chip across all industries. I think the advent of just mobile phones and just other things, the consumer customers expectations have risen exponentially and it includes payments. They want to be paid quickly, fast, they want things seamless, they want it secure, good customer experience. And that's what we're seeing in disbursements as well.

[Chip Close]

I love it. Justin, we're here to talk about tip management. Obviously this is something you know a lot about. It's something we've been on stage together, we've been at things together and something a great place to start and I know you like to start here. But like when we talk about tip management, how do we define that? What is that just to, just to begin the conversation on a foundational level?

[Justin Roberts]

Well, the management of it is really based on performance. Right. When you think about gratuities and you think about how do you manage that. So much of it goes into like, you know, the performance of each and every person that participates, whether it's back of the house, front of the house, the direct connection with the consumer. And so how you manage that is really meaningful to people. Like how it's sliced and diced and how it's configured is really, really important. And so when we think about the management of that, we look at the point of sale typically as that system of truth that's taking in the sales data and it's processed in the credit card transactions. But then you have to look at not only the sales that are coming in, but then the hours that employees are worked. And then when you start to go down that a little bit, you start to see, okay, is this tip pool, tip share? How is an operator going to, you know, basically take all of that information and ensure that Each person receives the most accurate, you know, payment of that day. And so I think when you look at gratuity management, it's really evolved outside of this very manual calculation through spreadsheets and sitting there and kind of trying to do bank teller work and counting cash. And it's really now evolved into relying on companies like Kikfin to consume this data based off of the point of sale information, apply hardwire tipping rules, and then ensure that once that is done, the manager has the ability to look at it, review it, and then push send and make sure that that money goes directly to their bank of choice. And so the evolution has been really exciting. We have statistics that say 90% of venues are still kind of looking at physical currency today, which is hard to believe. But that trend is. It's only now starting to get to a point where operators are looking for the press easy button. They want to look at their technology stack and say, hey, I've got this last piece of this analogy process. I can use a company like Kick Fin in partnership with MasterCard and we can make it really easy from an operations perspective and a payout perspective. So it's awesome to see the evolution over the last couple of years.

[Chip Close]

So it's funny. So I said a second ago, right, that what Joe does is something that didn't really exist, certainly not like it does now. Even 20 years ago and 50 years ago, let's say chip distribution or tip management was largely just not something that the operator had to worry about. It was just, you know, it was all handled by the waiters and they tipped out. What they tipped out or there was no structure in place for there. And as restaurants have risen in popularity, as we have more restaurants, more good restaurants and things are more expensive, complexity comes from that, which is something that I've always loved about. What Kick Fin does simplifies something that has become very complex and cumbersome. Talk to me so specifically. Right? So I think we sort of understand it, but dive deeper into it. Let's talk about some of the challenges actually when, you know that operators are facing now as things have gotten more cumbersome, more complex. So, Justin, speak to a little bit that you guys see from talking to operators day in, day out at Kickfin.

[Justin Roberts]

Well, operators want people to be, you know, gainfully employed. Like they want the best out of their staff. And when you think about that, and as, you know, as I think about the comment you made about paying a bill, right? So think about in current state, that operator gets, you know, physical cash delivered, they're handed it out, you know, and that employee then is there now left with a burden. They have cash in their hand. So when you think about paying a bill, it's really challenging. If you're come out of Your shift with $150, your cell phones bill, rent's due, whatever that may be. And so operators are really looking for ways to ensure that their employees are more efficient. They don't want them having to go to an atm, deposit that cash. I'm sure Joe has a ton of stats when you think about employee expectations, but the employee expects to be paid in the most modern way, right? The W2 way. Just set it and forget it. Tips are really important to these employees earnings, and it's really important for them to get that money, get it quickly, get it to their bank of choice, and then allow them to be efficient with it and kind of remove that burden of dealing with cash. So that's been kind of like when we think about the partnership with MasterCard, like, it gets really exciting when you can now look at a brand like MasterCard that, that is, you know, very trusted and, you know, you, you find ways to make sure that these employees are paid the most efficient way possible.

[Chip Close]

Yeah. So, Joe, same question to you. Anything to add here or again, share your own insights, your own perspective?

[Joe Zelzer]

Yeah, I mean, I think just to add on to, you know, what Justin was saying, I think at the end of the day, it's not just right, calculating the tips. It's still the big part is right paying them out. So when you think of kind of the significant problems that we have with cash, over 85% of transactions when, right. When you go to restaurants are paid electronically. So it requires, as I think Justin mentioned, some of this. I mean, it's either, you know, you're going to be short on cash, so now you got to make a bank run for to have the tips paid out, you're going to have to have a cash delivery truck. And you're starting to introduce, right, all this inherent risk of handling cash as well as all the time and labor and cost that's going to be put on to your staff. So while there's an increased rate of credit card transactions, which has drastically reduced cash tipping, you still got this manual process of actually paying out the tips to the employees at the end of their shift. And it gets, you know, at times you could see, it gets awkward, right? You could be in certain types of restaurants, like I was in a diner where you literally have kind of like staff, you know, waiters, Waitresses sitting off to the side because they're kind of trying to get into the cash register area, waiting to get their tips. So they're not happy. Right. They just want their money. But I think when you think of having an integrated solution into the restaurant's point of sale saves the restaurant operator certainly a lot of time. At the end of the shift, calculating the tip payouts and reducing the time upwards of 45 minutes to over an hour, down to 60 seconds. That's where we see just tremendous value in a solution like this.

[Chip Close]

That's insane. My first job ever in New York City was in the heart of Times Square, 47th and Broadway. On any given night, there were eight bartenders and 25 servers. There were about 12 runners and probably 15 bussers. All of them were walking with cash at the end of the night. I mean, they had a truck dropping thousands and thousands and thousands of dollars. Because it was an expensive restaurant. There weren't a lot of people paying with cash. So there wasn't a lot of cash coming in. I mean, thousands of dollars that had to be dropped off, counted to make sure it was right distributed every single night. And you can imagine what it looks like to your point, 25 people lining up at the service bar to get their. To get their tip out at the end of the night was cumbersome. You know, putting the bartender, bartender having to, you know, cash out, having the manager having to check that, and then from a guest perspective, seeing 25 servers who were all clocked out trying to get paid, you know, it sort of like ruins the, you know, what should be happening backstage was very much happening on stage, you know, over to the side of the bar and sort of defeated whatever sort of experience we had been providing over the course of the previous, you know, hours while we were serving. So, Justin, dive a little bit deeper in here. Right? So, okay, that's the problem. I think we. I think we have a pretty good understanding of that. Oh, and I will say I like that something that Joe mentioned earlier. Now, Justin, you sort of brought it back around that now more and more people are just paying all their bills, paying their cell phone bill, paying their landlord, paying their whatever digitally. That now there's that extra added friction. If you're getting paid cash tip out every single night, you got to go home next morning, you got to wake up early, go to the bank, deposit it, wait for it to clear before you can then pay your cell phone bill. That this idea of it being automatic is just so much more efficient. And that's again, something that's just come out in the last X number of years. I love that. So, Justin, talk to me about the solutions. Right. So operators are solving this in the ways that they need to talk to me about it.

[Justin Roberts]

Yeah. So the solutions that really exist today is obviously one, cash, two, the employee's paycheck, waiting for that to accumulate over a bi weekly period of time, or three, like a digital solution. And so when you kind of like peel back those options, like let's just. We've already hammered down the problem. Like we know cash is a burden. We know employees don't want to wait, they want to get instance of the paycheck is out there. But if we look at digital kind of, I think about that in really two buckets. So you think of one like a pay card solution. Right. So pay cards are, you know, a way in which they can receive it digitally. But if you think about a pay card solution, those require employees to establish like a new banking relationship, a new financial relationship. And if you look at the hospitality industry, we are recruiting the gig economy workers. The people who are working for Grubhub, DoorDash, Uber Eats. Those people, the way in which they're getting paid are instantly directly to their bank of choice. They're not requiring them to establish this kind of third party pay card situation. And so when I think about like the most modern way of getting paid, it's not forcing somebody into a third party pay card, it's saying, hey, whether I'm at a local credit union, bank of America, Wells Fargo, you name it, I can choose. Right. It's my choice and where I get those funds. And so I would say like, you know, again, the expectation is that these employees, they choose where they get those funds at. And so I think those are really kind of the three scenarios. But Joe, you probably have a much broader perspective on really where employees are expecting to receive that money.

[Joe Zelzer]

Yeah. And if we want to talk about just digitizing in general the right way, it's all about driving a positive impact on customer loyalty. Right. So you have to have a strong proven customer experience. And consumers across the board Right. Today expect to be able to pay and get paid fast wherever they interact. Right. So they're looking for speed, they're looking for an enriched user experience. So industry sectors like hospitality and dining I see is no different. Right. They demand for real time payments and action is growing. So no matter what size of, I think the restaurant, the type location, there's basically three common denominators that we see for Every good tip management program or strategy, it's really, it's all about speed. It's employee choice and the security of the platform and the system.

[Chip Close]

Now thousands of restaurants across the country use kick fin to send instant cashless tip payouts directly to their employees bank accounts the second their shift ends. It's a really simple solution to what has become a really big problem because let's face it, paying out cash tips to your workers day after day, shift after shift, it can be kind of a nightmare. Tedious tip distribution takes managers away from work that actually matters. It's hard to track those payments, which leads to accounting and compliance headaches. Plus, cash tip outs create the perfect opportunity for theft. And there's never enough cash on hand to actually pay out those tips. So we know your managers are constantly having to make bank runs. Bottom line, there's never been a secure, efficient way to tip out. Until now. Meet Kikfin. Kikfin is an easy to use software that sends real time cashless tip payouts straight to your employees bank accounts 24, 7, 365. Tipping out with Kickfin gives managers and operators hours back in their day. It makes reporting a breeze and protects your business from mistakes and theft. And guess what? Employees love it. So it becomes a really powerful recruiting tool. Best of all, restaurants can have kickfin up and running overnight. Employees can enroll in seconds and there is no hardware, no contracts and no setup fees. Get in touch today for a personalized demo and see how restaurants and bars all over the country are tipping out with Kickfin. Visit kickfin.comdemo and yes, that link is also in the show notes. Yeah, so, okay, so can we dive into those ones? Justin, let's start it off. Talk about, talk about speed.

[Justin Roberts]

Yeah, I mean the magic behind the software that we've developed, it's we're paying people 24, 7, 365. So you know, when an operator goes through, closes the borrowed at 2 in the morning and is now looking at this very important transaction that they have to have with their staff, we are moving that money like literally that second. The magic too behind of what we've developed is that these operators are going in, closing out before that employee can even get their apron off or get ready to grab their bag to go home, that money is in that bank of choice instantly. And that's the wow factor, right? I mean the fact that you can have an employee get paid on Christmas day when banks are closed, New Year's, whatever the holiday may be when banks are not there, that employee is going to have that gratification of being like, I just got paid now. Right. It's just as good as when I got the envelope of cash. But it's even better now because I can now safely leave the facility. I can deal with my money that is in my bank and I don't have to sit and wait for those, you know, those bank hours to receive that money. So it is, it's phenomenal. I mean, when we deploy kickfin, you see employees, the first time Cha Ching text message, you've been paid $150. That's really powerful. Like, that is a really amazing accomplishment as far as like just taking away all the tasks that would have to go into that. But now they get to walk with that money. It's there in their account.

[Chip Close]

Yeah. So, Joe, I'm going to kick this to you because the thing that I hear a lot when I've talked to clients of mine, members of my mastermind, about kick fin, right, about, hey, do you know there's another solution on the table which most people never know. And so I can put the money, I can pay the money, cash out every night, or I can pay out their tips in a paycheck at the end, you know, next week. And so when I say there's another option here, the thing that they always say is, well, I don't believe it. I don't understand how it would happen right away. I don't understand. And my people aren't going to understand that speed, that instantaneous piece to it. So shed some light on that for us.

[Joe Zelzer]

Yeah, I think, I mean, it's a good point. And I think the point you brought up earlier too, Justin, in terms of competition, right, if you're in the hospitality space, restaurant space, you're competing against these same workers that are gig economy workers, right? And they have the ability to get paid immediately. So when you think of like drivers, you know, like Uber Lyft, I mean, they're not even just getting paid once a, like a shift, like a day. They get paid sometimes multiple times a day, you know, So I think the expectation is very high. And if, if restaurants, the hospitality industry doesn't support the ability to do real time payments, they are at risk of turnover and not being able to fully staff their establishment. If you think back, I remember to like Covid and shortly after there were times where we'd go to restaurants, you know, we'd go out and they didn't even have staff, you know, And I think even to this day it seems like they're a bit short staffed. You know, if you go into some of these restaurants, there's just not enough staff. So I think if the competition is high, you gotta ensure. Right. Your employees have all the advantages that another kind of competing industry for that same population.

[Chip Close]

Yeah, no, I was just gonna say, I mean it's an interesting that happened, interesting thing that happened over the course of the pandemic is that pre pandemic we were competing for people with the restaurant down the street. And then over the course of the pandemic, we started competing with entire other industries because people had to leave our industry because they had to get a job, they had to pay their bills and they discovered that they had skills that would trans or that they didn't necessarily need to do restaurant work, that this becomes an asset, a real thing that we can use to lure people back to our industry. Because Target's not paying you at the end of the shift, Starbucks isn't paying you at the end of the shift. But here you get paid at the end of your shift digitally. It drops in your account and you can spend it right away. And I think that that becomes a big thing that we have to do better. I mean, we are slowly doing better, but we have to get better about talking. There are things that are really hard about our industry. Long hours, late nights, weekends, holidays. Nobody's, nobody's refuting any of that. And yet low barrier of entry and ease of getting paid and swiftness. You know, there are things like this that we, that we should be better and we can now be better about really promoting when we're trying to lure employees in.

[Joe Zelzer]

Yeah, I think it's a great point. I mean, if you look at, you know, stats, 90% of employers are paying earnings semi monthly or monthly.

[Justin Roberts]

Right.

[Joe Zelzer]

So today only 16% are providing this real time wage access. So even though I think in the restaurant hospitality industry, when you think of cash is a problem, the one benefit that it does present right. Is it's instant. The problem is it brings all these other kind of challenges that we spoke about. And when you think of kind of like the hospitality worker, that's I think chip to your point, part of the reason they got into that space in the first place. Right. They want to be able to be paid quickly, whether it's daily or, you know, weekly. They don't want to wait monthly. And when you think of like another thing, I was just going to mention a survey. So in 2023, payroll.org had a survey. 78% of Americans are living paycheck to paycheck. I know we hear about that often, but I don't think people fully understand how many people are living that way in the us so knowing that just kind of presses why it's so important to have these real time payment solutions for wages, for tips. It's just to me, it's paramount. If you're going to attract and retain best talent, you're going to have to offer these types of capabilities.

[Chip Close]

It reminds me of way back in the 80s. Right. There's a case study with Ritz Carlton. Ritz Carlton was the best hotel in the world and they were having a really hard time attracting top level talent or really good talent at line level jobs. So Dorman, Bellman, front desk agents, concierges, they were having a really hard time and they brought in one of the big consulting agencies to come in and they basically said, you just have to talk more about the benefits of the job. And what happened is that people, the executives at Ritz Carlton, thought that some of the basic things were liabilities about their job and didn't realize that they could be seen as assets. And basically the consulting firm came in and said, nope, it's the same thing. You just have to talk about these things. Because the people that love those things, like the ability to travel, like Ritz Carlton, had this incredible transfer program that you could work in New York and then the next year you could work in Bangkok and then in London and then in Argentina and they would secure you all the necessary visas to go wherever you needed to go. And so is that right for everybody? No, people. Some people have families and they need to put down roots. But for a whole other kind of employee, maybe young, maybe at a certain point in their life, being able to live in five different countries over the course of five different years is very much an asset. So where they saw a challenge in having to transfer people to other locations and it was sort of like pulling teeth. It was like, well, because you're not attracting the people who want that. And so it's to your point here, not everybody wants or needs that immediate paycheck, but there are a whole lot of people who would really benefit from that and would really gravitate towards that. And we just have to say, hey, this, this is something we do. Here's a, here's a real asset of this. Yeah, you're going to work long hours. Yep. Sometimes you're going to get out at 2:00am, but you know, at 2:00am you're going to have your money and it's going to be Dropped right in there. So I think it's. I sort of see the direct parallels there. All right, so I want to go through these other ones. Right. So we talked about speed, talked about employee choice and security. So let's drive into choice. Justin, kick us off there. So when we talk about employee choice options and all of that, what do you mean by that?

[Justin Roberts]

Well, I think that the most exciting piece of what we're introducing and have been doing over the last five years is not the fear of change, that it's going to disrupt staff, make things more challenging. If you look at like, again, we go back to the known facts, like employees expect to be paid the second their shifts done. They expect to have choice in how they receive that money. And so what we really try to encourage operators is like, we make our software really easy to just try before you buy. Like, you should be able to, by the time that you've gone to a bank branch and gone back, you should be able to flip, Kick Fin on process tips, get employees set up. And what we're really trying to do is like, kind of enforce this behavior of like, just give it a try. Because your employees, back to the comment you made about if you talk to them, you talk to your staff and you say, hey, like, you have this expectation, you want this modern way of being paid. We have this alternative right here in partnership with kickfin and mastercard, like, we can literally make this easy for you. And the great thing about that is, like, these employers now are starting to realize, like, yeah, this isn't a challenge that I have to have and that I have to go and try to upsell them on this opportunity because they actually expect that before they even, you know, become employed there, like, they're, they're dealing in a modern environment where they're paying their bills online, they're doing things in a more modern way. And so from our perspective, I think going back to like, you know, the most important piece of this is that it should not be an if but a when. So give it a, you know, try something that's different. Embrace a modern approach. Communicate the staff. It's going to make their lives easier. And from that, that side of it, it's, it's been a huge win, what we've seen.

[Chip Close]

Yeah. So before Kick Fin, right there was, we pay out in cash, we do payroll or we start doing pay cards. So I think we all see the pitfalls and sort of the, the downside of cash. I think we're, I think anybody listening can, can see the sort of Inefficiencies there. But Joe, talk to me about the other one. So payroll and pay cards are probably the other most used forms. So talk to me about sort of the, the issues that can, can happen when, when people have to use those.

[Joe Zelzer]

Yeah, yeah. I mean, I think some populations like we see like underbanked or unbanked. Right. Populations, payroll cards, you know, at times do make sense, but I think the majority of the consumers, workers would rather it be right direct to their own account if they already have one. Otherwise, you're right. Introducing another step. The other thing is even though payroll cards, you know, are flexible and in some ways convenient as a payment option, there are some other fees that might be introduced. Right. So depending on the payroll card, there could be fees for ATM withdrawals, there could be fees even at point of sales, you know, swipe fees. So I think it's depending on the population, you know, which ones, which solution I guess makes the most sense. But I think what you see in like say the gig economy, there are partnerships where, you know, they have a payroll card but also an ability to send it to your own account, you know, through, through MasterCard's, you know, solution to do real time payments. So I, I think it's like choice, you know, it depends on what, what the employer wants to offer. But I think the more choice you could provide your employees, the better. When you think of, I just want to go back to like a few stats that I wanted to mention. So when given a choice, 68% of consumers would choose instant payments. And it goes up to nearly 73% when we're starting to talk about income or wages and tips. And 81%, this is staggering to me. 81% are willing to switch jobs to an employer that offers instant wage access. So it just goes back to our earlier conversation of competing with other industries. It's, you know, this is the mindset. And the funny thing is I think there's, you know, some misnomer, right that you know, this only applies to, you know, a certain demographic. But what we see in data is that this sentiment, it goes across all demographics. So it's, it's Gen Z, it's millennials, it's Gen X, but it's also baby boomers. So this expectation is out there. It's for, I think it goes across and it's just, it's a common kind of denominator that, you know, it goes back to speed, good customer experience, you know, security. I don't know, we'll talk about, but I don't Think this changes depending on kind of your age group or demographic that you're in.

[Chip Close]

I think you're right. I think people like getting paid no matter what. In my experience, I guess my limited experience on this planet, people like getting paid. Let's deal with that. So, Joe, again, you mentioned those three things, speed, employee choice, and security. Security, I think, is most paramount. So why don't you dive right in to talk about the security aspects of this?

[Joe Zelzer]

Yeah, So I think if, look, if you're concerned at all, right. About security and you're still using cash for payouts, that's a problem. Right. So 90% of restaurants today, from what we're seeing, are still giving their workers tips and cash. But from a security standpoint, right. Consumers and businesses expect, you know, everything to be protected. You know, their money, their data. So it's. It's one of those things that I think. I think as these solutions like Kick Fin is out there and is kind of introducing a new way in partnership with MasterCard, to be paid more quickly. I think it's, you know, employers, restaurants in the hospitality space, as well as employees are gravitating toward that because they see that it is safe, it is secure, and it is immediate. So when you, when you think about, for the restaurant, their own kind of internal, like their own operations and business processes, where there's a security and there's an issue. Right. Because there's a liability.

[Justin Roberts]

Right.

[Joe Zelzer]

When, when you have that much cash on hand, right. You're introducing other threats, other risks. There's, you know, risk of theft. You know, you were talking about Chip earlier, kind of late at night in a bar scenario where you're tipping out, you know, thousands of dollars at, you know, two in the morning, there's skimming. There could be human error that late at night, you're forcing kind of managers, right. To have, you know, make runs to a bank to ensure that they have enough tips on hand servers. I think that's another great example. You don't want your employees, right. Your, your waiters, your waitresses, bartenders leaving late at night, your establishment with wads of cash, which, by the way, I think you brought up earlier. The very next day, they're going to have to go to a bank to get it back into an electronic form to actually pay their bills.

[Chip Close]

Yep.

[Joe Zelzer]

So I think when you start to think of all these things from a security standpoint, kickfin and their solution starts to make more and more sense, like, why would a restaurant, why would someone in hospitality want to look at this digital solution Yeah, I.

[Chip Close]

Again, when I first met Justin, I was like, I was blown away that something like this existed. And I shared a bunch of stories of. Of when I was waiting tables in the first. I mean, I remember the first night. It was like New Year's Eve in Times Square. As you can imagine, New Year's Eve in Times Square is about a crazy. And it was like, the most money I ever had in my pocket at one time. And I was like, I can't believe I have to go all the way home. And I was scared. It was like I just worked so hard and so late, and I have a wad of cash that anybody can see bulging out of my jeans. It was like. And how scary and how scary that was. And I can only imagine. I can only imagine for others in that situation. Justin, talk to me about the nuts and bolts about, like, the specifics of actually, like, putting this into practice.

[Justin Roberts]

Yeah. So I think, like, what we typically see operators do is just take a phased approach to it. Their number one goal is to eliminate cash. So they set up the software, eliminate the cash, and then they're like, this is now the 9010 rule. I'm solving 90% of the issues that I'm dealing with. But, like, 10% of my time I'm still doing this calculation in Excel work in these challenges that go into that. And what we've now seen the market really transition to is like, they want to rely on a company like Kickfin to do all those calculations for them now. So I would say, like, where is the market headed? The market is headed towards this dependency. This, like, we want this calculation engine to eliminate the managers touching the Excel spreadsheet, eliminate touching the cash drawer, and now have this digital ledger that has the ability of looking at how much money is coming in, processing the calculations, providing all the reporting. And so I would say, like, if I look at the implementations that we go through on a monthly basis, more than 60% of those are getting set up directly with an integration with point of sale. Because the market's been educated, there's a better alternative. They can rely on the system to do all that manual work for them. And we have fantastic case studies like, this is hard $roi. Like, you can look at a company like Bar Louis is a great example of saving managers close to two hours a day from the bank to work and the calculation work. And so now that we're seeing these operators believe that there is a better solution, they're now really relying on us to do the integrations that are making this so much more beneficial to them. And that's been the best part of it. It's like, yeah, it's great to show up and eliminate cash, but what can you do to earn your seat at the table to be an efficiency tool? And from our perspective, that's been the best part of what we've developed over the last couple years.

[Chip Close]

Yeah, it's funny because I spent a lot of time talking about what our managers should actually be doing in that the job of a manager is to manage the profitability of the restaurant. And when they're doing all the busy work, which we know they have to do, it just takes them away from deep thinking, deep, thoughtful work of managing profitability. Okay, how do I generate more revenue, how do I increase covers, how do I increase ppa, how do I manage my expenses? And if you're talking about two hours a day, 14 hours back in the week where you go, okay, well, how am I going to reallocate that time to revenue generating or profit generating activities? And that, that becomes a really exciting thing. Guys, I really appreciate taking your time out of your day to be here and chat about this. Obviously, I want to be respectful of your time. Any last words of wisdom on this subject or anything? Joe, Anything else you want to share with the group before we cut you loose?

[Joe Zelzer]

Yeah, sure. So I just want to reiterate. So MasterCard is focused right on developing these solutions to meet the needs of customers. In terms of real time disbursements at MasterCard, we are definitely happy to be partnering with Kickfin and to help bring real time payment payments and payouts to hospitality workers. So with that, like to thank you both, Chip and Justin, for having me on, on the podcast.

[Chip Close]

Yeah, well, listen, we appreciate it, Justin, Any, any last words of wisdom for you guys?

[Justin Roberts]

Well, it's, it's a pleasure to be here with MasterCard. I mean, when you think about the security element to this, the brand recognition and just, you know, the confidence that, you know, MasterCard can bring to a company like Kickfin has been great. So, Chip, you have the best audience around. These are the hardest working people, you know, when it's all said and done. We're just trying to be of service to, you know, the hospitality industry and feel lucky to be here today. So I appreciate it.

[Chip Close]

Totally. I agree. I'll end with this by saying we certainly didn't have the time or bandwidth to get into this today, but we're in the middle of an election cycle and tipping for whatever, for whatever it's worth is being thrust right into the spotlight again. And so I don't think this is a one and done situation and I think it's going to be part of the national conversation over the next coming years. And I think that's, that's pretty obvious in reviewing news cycles. I'm sure you guys are well aware of that. So this is, I think, top of mind for a lot of people. So I appreciate you sharing your insights here as people are trying to wrap their heads around it in new ways moving forward. Justin, where can people go to learn more about kickfin? If this is something they want to check out, try out, ask some more questions about.

[Justin Roberts]

Yeah, just kickfin.com submit a form, we'll show you a quick demo. We make it as easy as 15 minutes to like literally just see the demo get signed up and there's no contracts, no setup fees. We just try to make it really easy for people to at least try, compare, like at least there's an alternative.

[Chip Close]

Yeah. And listen, and I really, I really stand behind this thing. I am very specific with the sponsors that I partner with on this show because I know people trust me and they show up and they're looking for solutions to solve their problems. And Kickfin has been a partner of this show for a very, very long time. And that's because I think what you guys have built and continue to build really is something that helps independent operators out there. That's this audience. This audience are independent operators, owners, people who are working really hard to try to make their businesses generate some stability and security for their families. So listen, Joe, Justin, I appreciate you taking time out of your day. Thank you very much. Once again I gotta thank Joe and Justin for taking time out of their day to sit and chat with us. Kick Fin obviously is a leader in this space. MasterCard is a global leader when it comes to processing payments and especially now when it comes to quick real time disbursements. And that really impacts us, our industry, our servers, our bartenders, bussers, runners, baristas. All of that makes a big, big impact. Again, all the links are in the show notes. One final request, if you get any sort of value from this show, if you haven't done it yet, please go to Apple podcast, leave us a five star rating and review. Just let other people know what sort of value you get out of the show. Let them know why you think they should tune in. That more than anything else would help this, my small business. Appreciate you guys very much and I will see you next time.