Automated banking machine fees will be under scrutiny Monday as federal Finance Minister Jim Flaherty sits down with bank executives to discuss the charges.

The private meeting in Toronto could mark an end to ABM fees as we know them — a prospect that worries bankers.

Flaherty has said his goal is to ensure competition and choice, after the issue was keyed up last month by NDP Leader Jack Layton.

Layton launched a scathing criticism of fees imposed on clients who withdraw money from their bank accounts at machines of other institutions, calling the levy of between $1.50 to $2.50 "very, very high — and unfair."

The NDP chief estimated the big banks rake in $420 million a year in ABM fees, as they accumulated a record $19 billion in total profit last year.

The banks argue that the fees are necessary to cover the high cost of new machines and maintenance costs to keep up with technological advances and customer demand.

Bank of Montreal completed a year-long upgrade of its bank machine network in December, installing nearly 2,000 new machines. Canadian Imperial Bank of Commerce has said that it spent $125 million over the past year on upgrading its machines.

Significant costs

Royal Bank of Canada president Gordon Nixon said Friday that operating ABMs carries significant costs.

"There's an investment required in terms of developing and building those systems," Nixon said, adding "anything that potentially could change the dynamic of that runs the risk of potentially lower service."

On the other side, Duff Conacher of the Canadian Community Reinvestment Coalition says the fees have unjustly been on the rise for years.

He highlights a 1996 decision by the Competition Bureau designed to open up the banking machine market to "white label" companies — non-bank entrants in the ABM business.

The competition ate into the banks' market presence as white labels pushed them out of some locations, especially convenience stores, by paying rental fees for space.

The banks responded by upping their convenience charges.

"That's a sign there's something really wrong with this market," Conacher said, "because competition increased and the banks doubled their prices."

Some banks dabbled in an undercover presence on the market. CIBC created a white-label operation called Ready Cash, charging even its own customers to use the machines.

Ultimately the issue comes down to whether a customer is willing to shell out the extra cash for the convenience of using a machine from another bank, says Laurence Booth, a finance professor at the University of Toronto.

He suggests the government is stepping into an area where it shouldn't become involved.

"This is not an issue of vital national concern — there's not really a great deal of public interest involved," he said, adding that clients choose to use a nearby machine and pay a fee rather than go to their own bank or by withdrawing more money when they use their own bank's machines.

The bankers will likely present a similar argument when they sit down with Flaherty.

The Canadian Bankers Association found in a 2004 survey that 34 per cent of Canadians use ABMs as their main way to bank, and Canada has the highest ratio of bank machines to citizens of any country in the world, with nearly 16,000 ABMs as of 2005.

There have been suggestions that if the government enforces reduced or non-existent ABM fees, the banks will simply find other ways to build them into client charges.