Dow Jones 10426.69 -40.71 1:08 pm PST, February 1, 2005  NASDAQ 2035.83 -11.32 For info, visit access.smallcapnetwork.com S & P 500 1171.34 -3.21 Change your subscription status here Russell 2000 613.52 -3.38 VOLUME 05: ISSUE 8  Feature: Payment Data - More Deals. Sector Heating Up. We Alerted the readership to payment solutions provider Payment Data Systems (OTCBB: PYDS) on November 12th. Since then, the company's corporate progress has been nothing short of outstanding. Substantive deals announced, new revenue streams opened and expanded: would that all smallcaps could boast as much. The latest deal inked (release below) is with Lexicon Marketing. This 30-year old company, which provides language-learning services to the Hispanic community, has expanded its business with Payment Data to provide payment services. The relationship has the potential to add $1 million of new revenues over the life of the contract. We feel that at current levels, PYDS shares continue to look a good accumulation candidate. Should the shares not violate the trend-line (shown in green)--which seems very supportive--there does not appear, technically, to be any resistance until 43-cents. Given the pace and quality of previous, current and, we believe future deals, risk-oriented investors would be wise to gain or increase exposure to the company and the sector. The Payment Data story has legs. Previously announced deals include Kubra, a multi-year referral and incentive warrant agreement with the potential to generate $45 million in gross sales. The recently announced Yodlee contract has an  $11 million value over three years. Consumer loan company Credit Payment Services Inc selected PYDS to provide services to its stored value cards with gross revenues of approximately $1 million. And today's announcement with Lexicon Marketing continues the revenue growth potential as well as the sector influence of Payment Data's solutions. The company has further expanded its revenue streams by establishing new processing agreements with billers that had previously bypassed PYDS for other providers. Initially, seven new billers have signed on with a transaction value of more than $7 million. We expect this initiative to continue to grow significantly for PYDS over the next few months.  Further, Payment Data has signed a multi-year agreement with Online Insurance Services (OIS). The payment services provided for OIS supports $3 million per year of current transactional volume.  PYDS was chosen as the provider of choice due to the fact that its solutions open up new market opportunities and proved more able to keep up with OIS's phenomenal 400 percent year over year growth for the last four years, which left OIS's previous vendors lacking. That level of growth is expected to continue over the coming year. The electronic payments sector heats up. When one looks at the successes and the rise in share prices of larger peers such as Bottomline Technologies (NASDAQ: EPAY) and iPayments (NASDAQ: IPMT) it is no stretch at all to extrapolate the current and future potential of Payment Data. With the recent trade volume increases, the shares are undoubtedly appearing on more radar screens. With the quality and size of deals announced and those we believe are to come, investors who accumulate shares will likely be pleased that they got involved, now, in this quickly growing and expanding company. The best part of the PYDS story is the speed and quality with which the company can address and provide solutions to a diverse pool of customers. A quick read of just a few of the company's previous press releases gives an excellent picture of a company with solid technology than can be adapted to solve extremely complex client needs. Now, and future potential Payment solutions are not all about just processing payments. It's about providing the most cost-effective way for customers to facilitate payments and the attendant ease of use for the end user clients to purchase and efficiently and quickly pay for goods and services. Risk-oriented investors merely need to do the math. Taking the value of announced contracts to date, and the future potential against a market cap of roughly $6.5 million, we firmly believe that Payment Data shares deserve exposure in the speculative end of a portfolio.     Press Release Payment Data Systems, Inc. Announces The Expansion of Services To Lexicon Marketing San Antonio, TX February 1, 2005 -- Payment Data Systems, Inc. (OTC BB: PYDS) today announced that it has signed a multi-year agreement with Lexicon Marketing to provide payment services for their businesses. Lexicon Marketing is a thirty-year-old organization offering unmatched products and services for Spanish speaking consumers and the organizations that employ them. Currently, Lexicon has over 800 professionals across 30 offices in the U.S. and Mexico servicing the fast growing Hispanic community.  Additionally they are one of the largest advertisers in the U. S. targeting the U. S. Hispanic market.  Lexicon is the leading company in providing self-study language products to the US Hispanic market and its flagship product, Inglés sin Barreras, enjoys a 95% brand recognition in Hispanic households. Based on current transactional volumes the contract with Lexicon, has the potential to provide new revenues of approximately $1,000,000 over the life of contract.  President and COO of Payment Data Systems, Inc. Louis Hoch, said, "Lexicon is clearly successful in their marketplace.  Furthermore, their market is deeply aligned with what we have defined as significant demographics and we believe this compatibility will serve us well as we continue to build and deliver services to the Hispanic market.  We are pleased to see the acceptance of our IPS CSRView product by a company that operates a multi-location call center operation with scores of customer service representatives." 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 or via email at ir@paymentdata.com. 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