Payment Data Systems Offers Customizable Bill Payment Web Sites for Billers

-Functionality Allows Customers to Make Convenient One-Time Payments-

San Antonio, October 12, 2004 -- Payment Data Systems, Inc. (OTC BB: PYDS) an integrated electronic payments solutions provider announced today the market wide availability of customizable websites for billers that allow customers to make one time payments via the Internet. Full details about this new offering can be found at: www.paymentdata.com/v2/onetimepayselect.htm

Louis Hoch, President and COO said, “This new product offering is an important step forward for our customers. It is especially useful for billers such as utilities and insurance companies, who need real time remittance information, allowing billers to accept one time payments over the Internet with access to real-time information.”

The enhanced website functionality is delivered to the biller in a context that matches the look and feel of the company’s corporate website and provides significant biller and consumer-friendly features.  The following are available features of the new websites:

·         ‘Welcome Page’ and ‘Terms and Conditions’ page to introduce the consumer to the site functions

·         An optional convenience pay page, if the biller chooses to recoup the cost of the service

·         Multiple payment channels such as credit card, debit card, and ACH debits from both a checking account and saving account

·         Payment confirmations that allows the consumer to track and authenticate payments

·         Integrated tools that provide for the real-time management and reduction of fraud and risk for both ACH and credit/debit cards

·         Custom remittance files delivered to the biller on a daily basis with an option of having real-time delivery of payment information as well

·         Integrated payment tracking through Payment Data Systems’ IPS Select CSR View product, which allows billers to perform customer service and manually input telephone payments as well

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).

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, electronic lockbox and returned check 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.

Payment Data is the owner of the electronic bill payment portal, http://www.billx.com . billx.com has the ability to transmit electronic payments to thousands of national billers.

For additional information, visit http://www.paymentdata.com . Investor information can be found at: http://www.otcfn.com/pyds .

Contact: Geoffrey Eiten, Investor Relations, OTC Financial Network, (781) 444-6100 ext. 613.

Source: Payment Data Systems

FORWARD-LOOKING STATEMENTS DISCLAIMER

Except for the historical information contained herein, the matters discussed in this release include certain forward-looking statements, which are intended to be covered by safe harbors. Those statements include, but may not be limited to, all statements regarding our and management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. Investors are cautioned that all forward- looking statements involve risks and uncertainties including, without limitation, the factors detailed from time to time in our filings with the Securities and Exchange Commission. One or more of these factors have affected, and in the future could affect, our businesses and financial results in the future and could cause actual results to differ materially from plans and projections. We believe that the assumptions underlying the forward- looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to our management. We assume no obligation to update any forward-looking statements, except as required by law.

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