Company Expands Into Consumer Markets SAN ANTONIO, Sept. 7 /PRNewswire-FirstCall/ -- There's no doubt about it. With nearly 1.5 billion in circulation last year, prepaid debit cards are here to stay. Payment Data Systems, Inc. (OTC:PYDS) (BULLETIN BOARD: PYDS) announced today that it has entered into an agreement with Carmen Electra that grants the company the exclusive marketing and distribution rights of Carmen Electra- branded transaction cards. The versatile Carmen Electra is a singer, actress, dancer, and savvy businesswoman. Her current projects include being the celebrity spokesperson for Max Factor cosmetics and a role in 20th Century Fox's Cheaper by the Dozen 2. Last year, Ms. Electra released a DVD series called "Aerobic Striptease" in which she teaches low impact total-body workout exercises; the series launched a new fitness craze. Signing an agreement with Payment Data Systems is another indication of her intuition and keen business sense. "The Carmen Electra cards give me another way to connect with my fans while providing them the ability to enjoy the convenience of shopping or paying bills with ease -- online and offline," said Ms. Electra. "Payment Data Systems is the perfect partner for me because of the capabilities the company already has in place." In an increasingly electronic world, an estimated 70 to 100 million credit-challenged consumers in the United States are turning to prepaid debit cards for online and offline transactions alike. Credit-challenged Americans include students, low-income persons, and new immigrants. "Prepaid debit and gift cards enable anyone to transact online, offline, and by telephone," said Michael Long, chairman and CEO of Payment Data Systems. "Prepaid cards are a perfect complement to Bills.com, our online bill payment property. The agreement with Carmen Electra -- given her fan base and natural appeal to a significant percentage of our target consumers is a coup for us." PDS is currently in discussions with a number of other major celebrities who appeal to the company's various demographic targets. "The Carmen Electra agreement is just the beginning of a series of moves in preparation for our expansion into lucrative consumer markets," said Louis Hoch, President. "The time is right for us to leverage not only our payment processing capacity but also our Bills.com property." About Payment Data Systems, Inc. Payment Data Systems, Inc. is an Integrated Payments Solution Provider delivering comprehensive, cost-effective electronic billing and payment solutions. Service offerings include payment processing over the Internet, at point of sale, by customer service representatives and by Interactive Voice Response. One time and recurring ACH debits and credits, electronic lockbox and return check services, and web pay acceptance of credit cards and checks round out core services. The company further enables comprehensive tracking and reporting regardless of source or channel through automated, consolidated payment receipt systems. The company also owns http://www.bills.com/ , where consumers may make electronic payments to thousands of national companies and manage their electronic funds transfers. For additional information, visit http://www.paymentdata.com/ . 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. Payment Data's Media Contact: Myrna Nickelsen Gear Seven Communications (510) 236-8505 Investor Relations Contact: Michael Long Chairman and CEO Payment Data Systems, Inc. (210) 249-4040 Carmen Electra's Media Contacts: Jill Fritzo PMK/HBH-NY (212) 373-6142 Brit Reece PMH/HBH-LA (310) 289-6200 DATASOURCE: Payment Data Systems, Inc. CONTACT: media, Myrna Nickelsen of Gear Seven Communications, +1-510-236-8505, or , for Payment Data Systems, Inc.; or investor relations, Michael Long, Chairman and CEO of Payment Data Systems, Inc., +1-210-249-4040, or ; or Jill Fritzo of PMK-HBH-NY, +1-212-373-6142, or ; or Brit Reece of PMH-HBH-LA, +1-310-289-6200, or , both for Carmen Electra Web site: http://www.paymentdata.com/ http://www.bills.com/

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