Dow Jones 10539.01 +69.17 1:05 pm PST, November 12, 2004  NASDAQ 2085.34 +24.07 For info, visit access.smallcapnetwork.com S & P 500 1184.15 +10.67 Change your subscription status here Russell 2000 620.26 +3.96 VOLUME 04: ISSUE 91  Trading Alert: Payment Data Systems - A Bank in Your Pocket. I was stunned to learn that roughly 35-40 million US households have limited or no access to traditional banking services, due to cultural, financial or personal reasons. While that's a hassle for those folks, we feel that it's a superior opportunity for SmallCap investors. This story gets really good. The answer? San Antonio-based Payment Data Systems, Inc (PDS)(OTCBB: PYDS).  As an integrated payments solution provider, PDS facilitates end-to-end payment systems that are equally beneficial and cost effective to consumers and companies (billers, retailers): whether you want to send money home, pay your phone bill or pay for a purchase online. The enclosed release (below) will give investors a flavor of the types of deals PDS has inked and will likely continue to win over the next few weeks and months. Today's announced deal with Credit Payment Services (CPS) guarantees that PDS will double its annual revenues in fiscal 2005.  When coupled with the previously announced KUBRAwin any revenues from that relationship will be incremental and those potential revenues could reach as high as $45 million per year once fully implemented. PDS appears to be well positioned for exponential growth in 2005.  The CPS deal also validates PDS's market position within the debit card industry; only a handful of debit card providers can boast having 50,000 cards issued.  Salient points: Market cap roughly $5 million (with shares at 25 cents) Shares outstanding 22.4 million Non-bank financial services industry estimated at $280 billion Strong reseller/client partnerships including multi-year contracts/agreements with Checkfree (www.bills.com), ACH Commerce, Secure Cash Network, Verus Financial Management, Kubra and Harbor Payments, Inc. An emerging leader in processing ACH (check), credit, and debit card payments--both one-time and recurring-- for some of the nation's largest billers and retailers. Technology boasts ease of use, enhanced efficiencies and lowered costs Robust solutions for both low and high volume billers. Products include state of the art tools for privacy, risk management, security and fraud detection. Significant licensing potential with Financial Institutions from company's patent pending for proprietary bill payment and debit card loading service. The same experienced management team that previously took Billserv, Inc. from the OTCBB to gain a NASDAQ National Market listing with a peak market cap of $600 million. We believe that accumulation of PDS shares by risk-oriented investors is warranted for the reasons above and below. In our opinion the company feels like a ground floor opportunity similar to iPayments (NASDAQ: IPMT)--the most successful IPO of 2003. PYDS can be volatile and has a relatively small number of shares--the public float is roughly 20 million, the active float is 15 million-- so watch for gapping. The shares appear to have bottomed out at 16 cents in July, retesting that bottom once again in August. Since then it has made a good run hitting a high of 33 cents in early October--then retracing roughly 50% of those gains. Accumulation at these levels looks to bode well for traders and investors looking to take advantage of the next leg up. The potential for the share price to break above 33 cents looks highly possible and would confirm a continued uptrend. The scope of Payment Data and its market are enormous. A profile of one facet of its quiver of cutting edge product offerings will undoubtedly cause investors to look further into this SmallCap; here's the website (www.paymentdata.com). Who needs a Bank? There are 35 million 'unbanked' Hispanics in the US. Traditionally, these folks send money home--a lot of money--roughly $30 billion annually to Latin American including $15 billion to Mexico alone. Until recently, the method of choice was through the very expensive facilities of (charges can be upwards of 10 percent) Western Union. Here's how it works. An individual walks into, say, a convenience store such as CircleK and buys a Pronto Banco?package, which comes with two debit cards and a prepaid Estafeta envelope--the courier of choice in the Hispanic community. The individual loads the card-- a metaphor, actually, in that the money is stored in a secure bank account and not on the card-- with an amount of cash that is given to the approved, secure retailer.  The individual can then use one debit card for personal use and securely send the other card back home where friends or family can use it locally at merchants or ATM's within the Visa's Plus and Interlink networks and MasterCard's Cirrus and Maestro networks as well as the independent networks of Star and Pulse. A pin number comes with the card. Both debit cards are linked to the money securely deposited in the US at the time of purchase. Individuals can buy the Pronto Banco? debit card at over 10,000 locations--and growing daily--and reload the card at over 100,000 retailers, including convenience stores and check cashing establishments. As well, those with Bank accounts can reload over the Internet at partner Secure Cash Network's site: www.reloadhere.com. And to do this costs about 1/2 what Western Union would charge. Plus, it's more secure and convenient that carrying around a wad of cash either here or there. PDS can see the number of retailers growing from 10,000 currently to 60,000 and beyond within twelve months. Patently explosive? Payment Data's patent pending bill payment service and it's loading services for debit cards provide an excellent opportunity for PDS to earn more sales in the debit card industry.  What is really interesting is that PDS's patent, once approved, will cover all bill payments made on all debit cards.  Card issuers like Visa, MasterCard, American Express and Banks alike will potentially have to buy a license from PDS. The Pronto Banco card is only one example of the uses for a debit card. Think about the further potential for Payment Data as it also has the ability to issue cards for payroll, health benefits, per diem expenses and bill payment. This company does some very cool stuff and while early acceptance appears good, the huge market for PDS still has a long way to grow. The Banks currently represent about 3 percent of the transfers from the US to Mexico. That percentage is likely to stay low given that the targeted communities historically eschew banks.  PDS has no such baggage with customers. As you can appreciate, PDS's ease of use products--whether proprietary or special label-- have and will gain acceptance through viral or word of mouth advertising in a myriad of cultural communities; the best and fastest kind of growth. No checks, please. With the rapid decline of checkwriting, the need for easy, secure products for consumers and surety of payment for retailers is of paramount importance. No more bounced checks as well as ready access to secure payment options for the individual--whether in person, over the phone or over the Internet. For PDS, the backbone of the many services and products it offers is its single comprehensive storage and retrieval system. This feature can consolidate tracking of all payment types regardless of source or channel. It should be noted that PDS is a small company in its formative stages. While we feel the prospects and potential are compelling, those investors choosing to take a position at these levels should do so with those caveats in mind. The business model appears sound, management is deep and experienced and the market for its services and products will likely just keep on growing. While we see good things ahead for the company and its shareholders, a position in PDS--at this point--should find its way into the speculative end of a portfolio. We expect more news and announcements to come over the next few weeks and we'll bring them to you with our comment and opinion.  Payment Data Systems looks to be a very interesting situation.     Press Release Payment Data Systems Fulfills Initial Order for 50,000 Debit Cards - Agreement to Provide over $1,000,000 In Sales -  San Antonio, November 12, 2004 -- Payment Data Systems, Inc. (OTC BB: PYDS) an integrated electronic payments solutions provider, announced today that Credit Payment Services, Inc. (CPS) a high growth provider of consumer-oriented loans has selected Payment Data Systems to provide and support stored value cards as a supplement to traditional ACH credits. The current agreement should create approximately one million dollars in gross revenue for PDS with over $130,000 of that amount being generated this quarter. "We are pleased to see that CPS, with a national customer base has decided to use these cards to provide a secure and rapid service on behalf of their customers.  We believe our debit card offering will create many other opportunities for various industries to access a closed loop, private payment system that leverages public ATM and debit networks.  The private loop capability gives merchants access to new consumer groups and guarantees payments will be delivered without the possibility of chargebacks," said Mr. Louis Hoch, President and Chief Operating Officer.  The functionality of the offering will provide an immediate funding of the loan rather than experience the customary delays associated with the ACH credit process.  This rapid access to the loan amount should ensure higher service levels for consumers and opportunity of new revenue for CPS. 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.bills.com. Bills.com has the ability to transmit electronic payments to thousands of national billers.  For additional information, visit www.paymentdata.com. Contact: Michael Long, Investor Relations, Payment Data Systems, Inc. 210-249-4040. 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. 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