"Payback" is the twenty-fourth episode of the second season of Batman Beyond. It depicts the appearance of Payback. A masked vigilante stalks the streets of Gotham brutally attacking people who have wronged teenagers in various ways. Though he claims that he's doing this for a good cause, Batman can't allow him to continue. Meanwhile, tensions start to build up between Bruce and Terry as Bruce is becoming more scornful of Terry's mistakes and Terry annoyed with his criticism. Soon, Bruce becomes a target of Payback as well.
A teenager, Drew, heads out the store that he works in but his boss calls him back in saying that he has to do overtime. When Drew protests, his boss, Warren, threatens to fire him. Drew returns and another individual, a tall man wearing an outfit that appears to be made of black bandages, walks in. Warren mocks the man but the man angrily locks the door and attacks. Desperately, Warren pulls out the cash drawer (activating an alarm) and tries to give it to the man but it's swatted away. Warren tries to run while the man goes to Drew and tells him to stay where he is and he'll be safe. He continues to go after Warren, claiming that he's doing this for the kids that he disrespects. He almost kills Warren with a laser whip but Batman intervenes recognizing the man as "Payback." At first Payback claims that he's Batman's ally but when Batman refuses him, Payback decides he's the enemy too. After a brief fight, Payback escapes while Batman saves an ungrateful Warren.
After the fight, Terry talks to Bruce about the encounter and Bruce points out that he failed to capture Payback. Back at the Batcave, Bruce shows Terry that there's a connection between the victims of Payback, they're linked to teenagers that attend counseling sessions at the Gotham Youth Counseling Center. He has Terry enroll into the Center in order to learn more.
While at the Center Terry listens to a girl, Trina, belittle her boyfriend's DuWayne's cheating on her and is introduced to the group. When asked what his problem is, Terry claims that it's Bruce. After the session, the head doctor, Dr. Stanton takes Terry through the center and talks to him about his problem. During the walk, Dr. Staton introduces Terry to the two "resident geniuses" Howard Lewis and Dr. Stanton's son Kenny Stanton. Kenny asks his father to play but is refused. While Terry talks to Howard, Kenny continues to ask about doing something but his father refuses saying he has to work. Just then, a nurse rushes in saying that a girl, Maxine Gibson, has arrived saying she has an emergency. Dr. Stanton leaves to take care of the situation giving Terry time to search things on his own.
Terry sneaks into Dr. Stanton's room and hacks into his computer. Bruce quickly starts a download but while this goes on, Terry is attacked from behind by an unseen assailant. When he comes to he sees both Howard and Dr. Stanton looking down over him. Terry manages to make up an excuse for his being there and manages to avoid suspicion.
After returning to Bruce, Terry's scolded for not watching his back. Bruce tends to Terry's wound then tells Terry about what he's found. He's confirmed that Payback is linked to the Center and due to the fact that he has attacked victims from several different sessions, he has access to the Center's files. Terry instantly jumps to the conclusion that it's Howard, who has access to the files but Bruce doesn't see a motive.
Batman heads out to the Center and finds that Howard has been making strange looking statues and also finds the laser whip that Payback had wielded. While Batman examines the laser, Howard attacks him. However, after getting Batman down, Howard reaches for the phone instead of the laser. Batman doesn't notice this and continues the fight eventually bringing Howard down. Batman believes that he's gotten Payback but when he calls Howard by that name, Howard is only confused. He also claims that the laser is only used to cut the statues. Bruce calls Terry and alerts him to the fact that Payback is attacking someone far from the Center. Batman sheepishly apologizes "Um...sorry," and leaves Howard looking over his destroyed statues.
Meanwhile, Payback cuts his way into DuWayne's truck and mocks him for caring nothing for his girlfriends. He forces DuWayne to lose control of the truck, thereby sending it over a cliff. It's only through Batman's intervention that they are saved. Afterward, Batman goes after Payback and attacks him. Payback fights back refusing to listen to reason. During the fight, Payback starts a forest fire and escapes while Batman tends to the blaze.
Bruce scolds Terry again this time over his attacking Howard, "You injured an innocent man! That's inexcusable!" Terry decides that Payback is Dr. Stanton but Bruce snaps at him again and insists that they'll do things his way from now on "Which means taking out time and getting it right."
The next day, Terry goes to the center and complains about how Bruce treats him and how he thinks he'll never be good enough for him. When he's told he should confront Bruce, Terry mentions how Bruce will be at a party at a new hotel.
That night, Terry takes Bruce to the Vreeland Marquis Hotel while newscasts announce him. Things seem to be okay but while Bruce rides in the elevator, Payback arrives and attacks him letting the other people on the elevator leave. Bruce delays Payback for a while but is unable to prevent him from cutting one of the elevator's breaks causing it to fall. Fortunately, Batman manages to rescue him. Payback continues his assault cutting a support beam trying to crush Bruce but it fails and when Batman tries to confront him, the structural damage causes the floor to fall out form under him. Batman saves him and Payback is unmasked. The real face behind the mask: Kenny.
While Kenny is being taken away by the police, his father realizes that this happened because he neglected him. Kenny's motive was that if he solved the patient's problems, then his father would have more time for him. Bruce tells Stanton to go to his son and leaves with Terry. Bruce marvels over how well Terry preformed but Terry states out that he wasn't performing.