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The tips stop here: Starbucks to take Square Wallet payments

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Starbucks coffee shops in America, all 7,000 of them, will start accepting payments from Square's Wallet next month, but they'll be no tipping until 2013.

Starbucks has $25m invested in Square, the revolutionary new way of paying which is neither revolutionary, nor new, but does have a Silicon Valley celeb at the helm and $300m in VC cash poking out from its pockets. In August Starbucks announced that all its credit card payments would be processed by Square, and next month users of Square Wallet will be able to buy coffee, but not tip the seller, with a flash of the phone.

Square Wallet is an Android/iOS app which stores credit card details, but also requires one to upload a photograph to flash up on the shop's till so one can be greeted by name on entering a store. Enter a Starbucks bearing an iPhone, and the Wallet will pop a bar code onto the phone's lock screen for instant payment, should one decide to buy anything.

But tipping will have to be in cash, at least until next year, so you'll still have to carry change if you want to be sure of a decent cup of coffee*.

Tipping is less of a big deal on this side of the pond, where we cling on to the ancient traditional of paying people enough to live on without relying on the generosity of strangers, but that tradition is fading fast as the promise of cash blinds the hospitality industry to the long-term implications.

When they were introduced, chip and PIN machines equally stymied tipping, leaving diners scrabbling for cash they hadn't brought when paying for a meal by card. But these days most machines will prompt one to enter a decent tip prior to asking for an authorising PIN, though they're not yet offering to calculate 15 per cent at the touch of a button.

Tipping is, of course**, responsible for the downfall of the hat in modern society as it was hat-checking which pioneered the optional-payment technique by offering a free service and then guilting customers into paying for it.

But it couldn't last, with the decline being driven by Brooklyn newspaper columnist Hy Gardner who, in 1938, calculated that protecting his $3.75 fedora cost him $138.25 in tips over six months, prompting many people to ask if wearing a hat was financially justifiable. Knowing that the girls didn't get to keep the tips didn't help either, but they would come and track down anyone mean enough to keep their hat on their lap.

The tipping issue also impacts NFC, where paying with a bonk of a card (or phone) leaves little time to calculate a tip, but Square will need to get the issue addressed if staff are going to be entirely behind the technology. Using an on-screen bar code is supposed to make NFC payments redundant, and could do so if Square can gain enough of a foothold before the technology overtakes it, but only if staff want it, and staff will back the technology which offers the biggest tips. ®

** I realise this is a controversial point, and is a popular subject of debate around Vulture Towers, but I'll argue my case just as long as the beer lasts.

*Also a controversial point (sub)

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