Payment Data Systems Announces Agreement to Enhance Development and Delivery of Integrated Electronic Payment Solutions

-Agreement Provides for $10 Million Equity Line of Credit-

San Antonio, TX, February 12, 2004 -- Payment Data Systems, Inc. (OTC BB: PYDS), an emerging leader in integrated electronic payment solutions, announced today that it has reached agreement for a ten million dollar equity line with Boston-based Dutchess Private Equities Fund, LP.

According to the Company, the funds will be used, as needed, to support on-going operations and enhance merger and potential acquisition activity targeted toward accretive and profitable organizations. Under the terms of the agreement, Payment Data Systems, may elect to receive as much as $10 million from Dutchess in common stock purchases over the next three years at the option of the company.

Michael Long, Chairman and CEO of Payment Data Systems, Inc. said, “This commitment from Dutchess Private Equities affords us the opportunity to implement several key components of our business plan, including a renewed focus on strategic business development opportunities that were previously unattainable. This equity line with Dutchess is an important step toward our clearly defined growth strategy and planned, focused acquisitions of complementary businesses from both earnings and technology perspectives.”

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 www.otcfn.com/pyds .

Additional products available from PDS include services and products that can be implemented more quickly and less expensively than the alternative of adding multiple payments companies as these solutions offer a full range of payment processing capabilities. These service offerings include: one time and recurring ACH debits and credits, ACH lockbox and RCK services, Web pay acceptance of credit cards and checks, telephone pay to Customer Service Representatives for acceptance of credit cards and checks, Interactive Voice Response systems which completely automate the payment receiving process, and data warehousing that enable the storage and retrieval of all payment history from one location.

These are all managed within a single comprehensive storage and retrieval system thereby providing the customer consolidated tracking and reporting of all payment types regardless of source or channel.

About Dutchess Private Equities Fund, LP

Dutchess Private Equities Fund, LP is engaged in assisting growth companies in all facets of their long-term strategies by providing capital and progressive business solutions. Dutchess Private Equities Fund, LP, manages a portfolio of private investments in public equities. Founded in 1996, Dutchess has been involved in excess of $200 million in financings for such companies.

Contact: Geoffrey Eiten, Investor Relations for Payment Data Systems, (781) 444-6100 x613 or geiten@otcfn.com.

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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