Payment Data Systems and TransAction Unlimited Sign Referral Agreement for ACH Processing

SAN ANTONIO, TEXAS: December 16, 2003 - Payment Data Systems, Inc. (OTCBB: PYDS) an Integrated Payments Solution Provider, announced today the signing of a multi-year referral agreement with TransAction Unlimited, a private company providing merchant services as a registered ISO as well as ATM transaction delivery services. This agreement provides the ability for TransAction Unlimited to promote and deliver Payment Data Systems’ comprehensive set of ACH products and services into their base of merchants. In addition, TransAction Unlimited is expected to open new merchant accounts that have been previously closed to them due to not having an ACH offering.

Management anticipates new volume of transactions will be added to Payment Data Systems’ growing base of processing traffic and expects additions to its growing sales and marketing force (extending the company’s national reach) without adding corporate expense overhead. Furthermore, the agreement will bring the company’s commission-only sales and marketing force to approximately sixty associates—an increase of more than fifty percent this year.

Louis Hoch, President and COO of Payment Data Systems stated, "We are very enthusiastic about this relationship given Transaction Unlimited’s market penetration to date. We believe with the reach they have into their market and the ability to add our products to their offering, they should be even more successful.”

Bennie Hall, Founder and CEO of TransAction Unlimited said, "Our market has demanded a feature-rich ACH solution for their consumers. With the products of Payment Data Systems, we believe we can now bring to our customers an expanded offering of the same quality they have come to expect from us."

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 TransAction Unlimited

Texas-based, twelve-year old TransAction Unlimited is a significant provider of merchant and consumer services across the nation. As a registered ISO/MSP they deliver credit card product and services to merchants and billers. Additionally they provide ATM devices in high traffic areas, as well as electronic check, debit processing, script machines, and vault cash services. You may contact TransAction Unlimited at 210.946.5811.

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.


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