The checksum in an IBAN consists of two digits that help verify if the IBAN is correctly formatted. It serves as a mathematical validation mechanism to:

• Detect transcription and typing errors
• Validate the integrity of the IBAN before processing
• Reduce failed transactions due to incorrect account numbers

The checksum is calculated using:

• MOD-97 operation
• Character substitution (letters to numbers)
• Mathematical validation algorithm

This validation can be performed before any transaction is initiated, helping to prevent failed transfers and associated costs.