Payment Data Systems Offers Customizable Recurring Bill Payment Sites to Billers and Debit Card Issuers

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

San Antonio, TX October 26, 2004 -- Payment Data Systems, Inc. (OTC BB: PYDS) an integrated electronic payments solutions provider announced today the market wide availability for billers to provide a custom website to their customers for recurring payments via the Internet.

“We are excited about this offering,” said Mr. Louis Hoch, President and Chief Operating Officer, “ which allows billers to cost-effectively offer their consumers the convenience of setting up and managing recurring payments. Our recurring payment engine has been implemented for many corporations and charities, like the United Way, that have the need to process repeating payments based on a fixed schedule. We believe this new offering will be of particular interest to debit card processors that need a site to report a consumer’s balance and purchase information as well as to accept debit card loads.”

The website functionality is delivered to the biller in a context that matches the look and feel of their corporate website and provides significant biller and consumer-friendly features. The following are a few examples.

• Two standard templates with unlimited optional ones available,
• Biller configurable payment portal allowing for management of portal context (color, buttons, borders, etc.), navigation, and data capture and validation,
• Welcome and Terms and Conditions pages to introduce the consumer to the site functions,
• A Frequently Asked Questions page along with a Contact Us page to reduce the number of direct contacts to a biller’s Customer Service organization,
• An optional convenience pay page option, if the biller chooses to recover the cost of the service.
• Multiple payment channels to accept credit cards, debit cards, and ACH debits from both a checking account and saving account,
• A Service Account Information page to show consumers where to locate their account number in order to assist correct entry the first time,
• Capture and retention of consumer’s payment account information to ensure correctness and to eliminate the requirement for re-entry each time a bill is to be paid,
• Allows consumers to set up repeating payments so they don’t have to return to the payment portal each time a bill payment is due,
• Web and Email payment confirmations that allows the consumer to authenticate and track payments,
• Integrated tools that provide for the real-time management and reduction of fraud and risk for both ACH and credit/debit cards,

Integrated payment tracking through Payment Data Systems’ IPS Select CSR View product that allows Billers to perform customer service and manually initiate 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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