Payment Data Systems and Verus Financial Management Sign Processing Agreement to Expand Biller Payment Options

SAN ANTONIO, October 6, 2003 - Payment Data Systems, Inc. (OTC Bulletin Board: PYDS - News) an Integrated Payments Solution Provider, announced today that it has signed a multi-year agreement with Network 1 Financial, a wholly owned operating company of Verus Financial Management, to provide credit card authorization and settlement services and sponsorship into Visa’s ISO and MasterCard’s MSP programs. 

Under the terms of the agreement, Payment Data will now complete the extension of credit card merchant services to all of its customers.  Verus will have access to Payment Data’s payment processing, which includes $600 million of contractually guaranteed credit card transaction value.  These transactions will come from large billers with relationship-based reoccurring billing.

Louis Hoch, president and COO of Payment Data Systems stated, "For our ISO strategy this is the last link in the chain necessary to begin implementation.  We could not be more pleased to announce this partnership with Verus.  They have demonstrated a great capacity to be a leader in the credit card processing industry and as such we believe we have access to world-class processing platforms and services.  Furthermore, through our formative discussions they have proven to be a valuable and innovative partner who listens and understands value-based relationships.”

Ron Carter, president of Verus Financial Management said, "Payment Data Systems has demonstrated that they have a clear and unique vision of payment processing for billers and merchants alike.  We are very enthusiastic about the relationship with Payment Data Systems and the near immediate value they are implementing with us. Once fully deployed, Payment Data Systems will represent one of our five top customers."

About Payment Data Systems, Inc.

Payment Data Systems, Inc., is an Integrated Payments Solution Provider delivering comprehensive, cost-effective solutions to billers and retailers for the processing and management of electronic payments via the Internet, point of sale, or payments taken by Customer Service Representatives or an Interactive Voice Response (IVR). For additional information, visit www.paymentdata.com or call 210.249.4100 or ir@paymentdata.com.

About Verus Financial Management, Inc.

 Verus Financial Management, a privately held Nashville, TN based company established in 2002, is a leading consolidator of successful payment processors into a “best practices” payment services company.  Solutions offered by it’s wholly owned subsidiaries include a wide range of payment processing services that meet the needs of traditional and non-traditional merchants.  These services include electronic payment processing for associations, retail, mail order/telephone order and Internet based merchants.  Additionally, the Company’s proprietary gateway provides OEM software makers in a variety of vertical markets with the ability to build a flexible payment module into their billing modules, allowing added convenience to their merchant bases, while creating new and attractive revenue streams for these technology partners.  Verus, Latin for “true, fair, or just,” takes the best practices of its subsidiaries and leverages them across the Verus family of providers, partners and merchants.  For additional information call 615.463.3221.

With the exception of historical information contained in this release, this release includes forward-looking statements made under the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.