June  18,  2004

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

Attn:  Mr.  Michael  R.  McCoy

Re:  Payment  Data  Systems,  Inc.
     Registration  Statement  on  Form  SB-2
     File  No.  333-114925

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
SB-2  (File  No.  333-114925)  originally filed on April 28, 2004, together with
all  exhibits  thereto  (collectively,  the  "Prospectus").

The  Prospectus  covered the sale of up to 40,000,000 shares of our common stock
by  a  stockholder

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aforementioned  Prospectus in the following manner: "Withdrawn upon the  request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,
Texas 78216 and 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)243-0050.

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