Just seeing an iPad screen at a coffee shop counter is enough to make most Americans grumble.
In recent years, Apple devices have become synonymous with the country’s “tip inflation” problem, spreading tipping culture from bars and restaurants to shops, takeout chains, and even self-service vending machines.
But there is one man who is certainly not complaining. Billionaire Jack Dorsey’s tech company Square — which sells the software that powers many of these iPad payments — made an eye-watering $3 billion in profits last year alone.
It’s a threefold increase from what the company made four years ago in 2018, when it made about $1 billion a year. In the first quarter of 2023, it earned $770 million, up 16 percent from the same period last year.
The numbers show how quickly such digital Point-of-Sale (POS) systems have taken over national retailers and hospitality establishments.
Square – which sells the software that processes iPad payments – made an eye-watering $3 billion in profit last year alone
iPad screens have become synonymous with the country’s “tip inflation” problem, spreading tip culture from bars and restaurants to shops, takeout chains and even self-service machines
Square was founded in 2009 by former Twitter CEO Dorsey — who famously implemented a “tip jar” feature on the microblogging site — and Jim McKelvey. The men have net worths of $4 billion and $1.4 billion, respectively, according to Forbes.
In 2021, the company was rebranded as Block, but the arm that controls the POS systems has kept its original name.
Shoppers may recognize the blue-and-white screens on iPad and iPhone checkouts asking them how much to tip, with options generally starting at 18 percent.
According to company accounts, it processed $46.22 billion worth of transactions in the quarter of the year – the equivalent of $513 million per day.
The company — which partners with merchants in all 50 U.S. states as well as Australia, Ireland, Canada and Japan — facilitates card payments and takes a small portion of each transaction amount.
According to its website, it costs 2.6 percent and 10 cents on a contactless or “swipe” transaction.
A keyed-in transaction – when a customer manually enters their card details – is subject to a surcharge of 3.5 percent plus 15 cents.
If an employee gets a tip, it adds to the transaction value — meaning Square gets a bigger chunk of the money back.
Square said it would be “inaccurate” to say that increased tips are the reason for the explosion in profits, claiming that the money it makes from tips on a transaction is “just pennies.”
Still, the company’s earnings show how reliant retailers have become on these interfaces that customers have come to dislike.
Historically, tips were only expected in restaurants and bars – or other venues where people were served by servers.
But lately, more and more stores and coffee shops have started implementing iPad POS machines that ask customers if they want to add a tip before completing the transaction.
Square was founded in 2009 by former Twitter CEO Dorsey and Jim McKelvey, who have net worths of $4 billion and $1.4 billion respectively
The trend was fueled in part by the pandemic, which left stores reluctant to accept cash and a need for a quick and easy digital alternative.
While they can say no, customers have often complained that they feel “guilt-driven” into agreeing to the surcharge.
Square said this earlier this year NBC news that tipping frequency at quick-service restaurants — including coffee shops and fast food chains — increased 16 percent in the last quarter of 2022 from the same period a year earlier.
Recently, customers have been outraged that even self-service machines even ask for tips – despite not interacting with an employee.
And the topic made headlines again when it emerged that Apple employees at a store in Maryland were lobbying to allow customers to tip their employees.
Experts say the move from physical tip jars to screens has caused a change in customer attitudes.
Cornell University consumer behavior professor Michael Lynn told Dailymail.com: “iPad screens are making it harder for customers to say no.
“In the past, customers only saw a tip jar and could ignore it if they wanted to. But now they have to actively say ‘no’.
“Many queue at a coffee shop and worry about what the man behind them is thinking.”
He added that the minimum amount set by the retailer for tip also has an impact.
Square says its merchants can opt out of including the tipping option in their POS system.
And they can also set their own minimum amount where tips start.
Shoppers on Twitter have complained that some merchants are setting their minimum tip option to 30 percent.
“The higher you set that amount, the more likely customers are to click on it and the more money the employee gets,” Lynn said.
Square isn’t solely responsible for all iPad transactions, as it has several rivals in the field.
A similar company called Toast grossed $511 million last year — a 63 percent year-over-year increase from 2021.
In the first three months of the year, the company grossed $174 million — an increase of 96 percent year over year.
Toast is used exclusively in restaurants. Both Square and Toast were contacted for comment.