Buenos Aires feels timeless with its downtown Parisian architecture, cobbled streets and sea of packed cafes. However, the postcard charm has always had an archaic counterpart: cash.
One of the most resilient forms of cash use in Argentina is tipping in restaurants and bars. Tipping with a debit card is legal up to 15%but in practice that option is rarely offered. As a result, customers – especially tourists – carry the burden stacks of bills for dinner, making stacks of pesos just for the tip a common sight, as the country’s largest denomination banknote until recently was only 2,000 pesos (about $1.50).
But tips are finally going digital in Argentina, thanks to both a boom in financial technology and a footnote in President Javier Milei’s “shock therapy” plan to overhaul the economy.
E-commerce giant MercadoLibre Inc.’s payments unit, Mercado Pago, has designed a new feature in its widely used app specifically for tipping. The change reflects how fintech has been integrated in cash-rich Argentina, which had 312 companies in the sector last year, up from 72 in 2017, according to an Inter-American Development Bank. report.
The latest update to the app — which is only available to residents of Argentina — builds on a growing, if uneven, trend of some clerks giving customers their personal Mercado Pago alias for tips on how Americans use Venmo or Zelle.
“The spread of digital payments and the decline in the use of cash began to negatively impact the number of tips waiters received,” Agustin Onagoity, senior director of Mercado Pago Argentina, said in a statement. “Our users and gastronomy employees really needed a tipping solution.”
Milei will do that in the meantime propose a law to formalize tipping on credit and debit cards, while his government does clear the way for commuters to pay for public transport with QR codes or a card like in New York or London. Cash is still required to top up a public transport card at Buenos Aires metro station kiosks, although digital top-up options also exist.
To be clear, another type of cash — U.S. dollars — is still flourishing in Argentina, one of the world’s largest recipients of U.S. banknotes, Federal Reserve research shows. Argentines hold billions in U.S. cash outside the formal banking system, economists estimate.
Apart from the dollar, all tangible signs indicate that the reign of the peso banknotes is coming to an end. Cash payments at supermarkets made up just 17% of total purchases in May, down from 36% at the start of 2020. Credit card payments have soared as Argentines take advantage of interest-free payment terms to boost their purchasing power in a country where 270% annual inflation is eroding wage growth.
Pedro Filippini, a 23-year-old barista at Zuka Cafe in Buenos Aires, lets customers send tips to his Mercado Pago account, even though the coffee shop has a traditional cash pot at the cash register. Filippini says tips at Mercado Pago tend to be more generous, around 1,000 pesos, while cash tips amount to the bills a customer carries.
Although Filippini prefers digital payments, he still sees a case for cash in a country where half the population struggles to make ends meet. As prices for mobile services have soared recently, he will run out of data before the end of the month and will rely on WiFi – when he can get it – to access his Mercado Pago account.
“If you are on the streets without mobile data, you cannot count on Mercado Pago,” he said. “Cash will always be indispensable, but Mercado Pago has had a lot of success because it really offers many benefits.”
