June  4,  2004

U.S.  Securities  and  Exchange  Commission
Division  of  Corporation  Finance
450  Fifth  Street,  N.W.
Washington,  D.C.  20549

Attn:  Michael  R.  McCoy

Re:  Payment  Data  Systems,  Inc.
     Withdrawal  of  Registration  Statement  on  Form  S-3
     File  No.  333-97869
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Dear  Mr.  McCoy:

Pursuant  to  Rule  477(a)  promulgated  under  the  Securities  Act of 1933, as
amended  (the  "Securities  Act"),  Payment  Data  Systems,  Inc.  (the
"Registrant")  hereby  respectfully  requests  that  the Securities and Exchange
Commission  consent to the withdrawal of its Registration Statement on Form  S-3
(File  No.  333-97869)  originally  filed  on  August 9, 2002, together with all
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amendments  and  exhibits  thereto  (collectively,  the  "Prospectus").

The  Prospectus  covered  the resale of a total of up to 4,146,154 shares of our
common  stock that may be issued pursuant to a convertible note and warrant that
were  issued  to  the  selling  security  holder  in exchange for a $1.5 million
investment.

The  Registrant  further  requests  that, pursuant to Rule 477(c), an order with
the  date  of  the  granting  of  the withdrawal be included in the file for the
aforementioned  Prospectus in the following manner: "Withdrawn upon the  request
of  the  Registrant,  the  Commission  consenting  thereto."

Please  forward  copies  of  the  order  consenting  to  the  withdrawal  of the
Prospectus  to  the  undersigned  at 12500 San Pedro, Suite 120, San Antonio, TX
78216  with a copy to Amy Trombly, Esq., 1163 Walnut Street, Suite 7, Newton, MA
02461.  If  you  have  any questions regarding this request, please call Ms. Amy
Trombly  at  (617)243-0060.

Thank  you  for  your  assistance.


Very  truly  yours,

Payment  Data  Systems,  Inc.

By:  /s/  Michael  R.  Long
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Michael  R.  Long
Chairman  of  the  Board,
Chief  Executive  Officer  and
Chief  Financial  Officer