Tipping adds a personal element to any transaction, showing a form of appreciation for a job well done. Before the pandemic, people were tipping on 63% of in-person credit card transactions that provided an option to tip. By August of 2021 that number increased to 66%, with the average amount of a tip rising slightly during that same timeframe.
But as more people are leaving larger tips, merchants are being stuck with larger credit card fees and not seeing additional revenue. Business owners end up paying processing fees on the transaction as a whole and include the tip during payroll.
This comes as the cashless economy trend gains momentum, with 41% of Americans saying none of their purchases in a week are paid for in cash—up from 29% in 2018. And 54% of adults under the age of 50 don’t worry about having cash on them.
Feeling this pain and leaning into this trend—while also looking for ways to help salon owners attract and retain talent—the Tippy solution emerged as a technology platform merchants can use to get tips to stylists on the same day or by the next business day. By embedding the Dwolla API within their platform, Tippy initiates Next Day ACH and Same Day ACH transfers so stylists can have their tips sent directly to a bank account. Salon owners aren’t losing revenue to credit card fees and stylists are getting daily payouts.
“ACH has been a stable, reliable solution that our clients have been very happy with,” Sasa Todoric, Tippy CTO says. Dwolla was the solution we were looking for.”
After adding Same Day ACH and Next Day ACH, Tippy saw an 86% increase in YOY payment volumes.
As transaction volumes scaled with expansion, the Tippy team admits to having concerns if the Dwolla API could adapt to larger transaction sizes and volumes.
“We had concerns initially because you never know, but Dwolla has allowed us to confidently scale.” Lead Software Architect Eldin Velagic says. “We are processing more transactions because the Dwolla API is capable of handling the long term scale we’re going through.”
Supporting Sophisticated Funds Flows
The Dwolla API is flexible enough to handle all three funds flow use cases with the Tippy platform.
“A big part of our software is the communication that we have with Dwolla’s modern API,” Velagic explains. “We use Dwolla quite extensively and really depend on the reliability of their technology.”
At the end of each day, Tippy batches all of the tips received by a salon or for a specific stylist, then batches those into a single disbursement using Same Day ACH or Next Day ACH transfer timing. Having this type of fast access to funds has been a major differentiator for Tippy.
“It’s very important to us that we deliver that earned income as soon as possible,” Velagic says. “We’ve spoiled our users.”
The second use case is an integration with POS systems to collect funds from those accounts into a Tippy account. These funds are held by Tippy in a Dwolla Balance, with ledgering technology tracking where the funds are coming from.
“Same Day ACH debit has eliminated the need for our customers to float any funds to their employees, freeing up working capital for them to direct towards their operations.” said Lindsey Lennon, CFO at Tippy.
The third use case involves Dwolla’s integration with Plaid for bank account verification, with a fallback to micro-deposits. As the relationship between Dwolla and Tippy progressed—and transaction volumes started scaling—Velagic says adding new functionality and funds flows was a seamless process because of clear API documentation.
“We’ve used the mass transaction aspect for years without any issues,” Velagic says. “We’ve integrated with POS systems to pull funds and that works with Dwolla because the technology is flexible to work how we need it to.”
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Bringing ACH to Other Industries
Having multiple funds flows and being able to collect or disburse funds very quickly has put Tippy on an “up and to the right” trajectory. The platform is expanding from salons and barber shops to fitness, hospitality, pet grooming, mechanics and home health care.
“The relationship we have with Dwolla is tight, they are a true partner to us,” Todoric says. “And of course, the technology just works. The platform continues to provide more solutions that we can easily adopt for our users to find value from.”
“Dwolla’s team is part of the Tippy team,” Lennon says. “They take the time to truly understand our business and goals, so they are able to effectively recommend features that are beneficial to our success.”
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