Payment Data Systems, Inc. Announces Record Revenues; Q2 Revenues Surge Up 71% over Prior Year Quarter

- Revenue Jumps 55% in The Second Quarter Compared to the First Quarter -

San Antonio, TX August 14, 2006 Payment Data Systems, Inc. (NASDAQ OTCBB: PYDS) an integrated electronic payments solutions provider, today announced financial results for the quarter ended June 30, 2006.

Revenues increased 71% to $539,615 for the second quarter of 2006 from $314,926 for the second quarter of 2005. Net loss for the quarter ended June 30, 2006 decreased to $328,153, or $0.01 per share, from a net loss of $496,531, or $0.02 per share, for the second quarter of 2005. Revenues increased 59% to $887,625 for the six months ended June 30, 2006 from $557,888 for the same period of 2005. Net loss for the six months ended June 30, 2006 was $754,110, or $0.02 per share, compared to net loss of $952,511, or $0.04 per share, for the same period of 2005.

Commenting on the results for the quarter, Michael R. Long, Chairman and Chief Executive Officer of Payment Data Systems, said, “We are pleased to see the momentum from the first quarter continue building through the second quarter and are excited about what this trend of increasing revenues portends for the remainder of the year. The corresponding transaction levels have generated sufficient momentum that has us processing at rates we had internally forecasted for the end of the fourth quarter of this year. As a result we could finish out the year well ahead of our plan.”

Long added, “Our credit card transaction volume was up 76% for the second quarter of 2006 and the related dollar volume increased by 46% over the first quarter of 2006. This growth in credit card processing contributed to the 55% increase in our revenues for the second quarter of 2006 from the preceding first quarter.”

Long continued, “We expect our card-based revenues to continue increasing with a resulting further decline in operating losses. This is attributable to the additional growth anticipated in our credit card processing portfolio and new revenue streams generated from our celebrity prepaid and gift cards as well as the PaySparkÔ card which should begin producing transaction related revenue in September. While we will begin to aggressively market our celebrity card programs in late September, we are selling cards already and have received national news coverage.”

For further information regarding our financial results for the quarter ended June 30, 2006, please read our 10 QSB that was filed on August 14, 2006.

 
About Payment Data Systems, Inc.
Payment Data Systems is an integrated payment solutions provider to merchants and billers. The organization provides an extensive set of products to deliver world-class payment acceptance. Payment Data has solutions for merchants, billers, banks, service bureaus and card issuers. The strength of the company is its ability to offer specifically tailored solutions for card issuance, payment acceptance and bill payments.

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

Payment Data Systems Inc. (OTCBB: PYDS) is a registered ISO/MSP of MetaBank.

Payment Data’s intellectual property includes U.S. Patent Number 7,021,530 that relates to bill payments made with debit and stored value cards.

For additional information, visit www.paymentdata.com. Contact Michael Long for Investor Relations information at 210.249.4040 or email at ir@paymentdata.com.

 
Payment Data Systems, Inc.
Michael Long
Chairman and CEO
phone: 210-249-4040
 
  
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