1. Levels of fraud are epidemic. Absolute majority of clientele have no credit score or have rather shitty one, so it's hard to score people properly, like banks do. You end up with rejecting almost everyone or lending a lot to people who have no intention to pay it back. Naturally, you factor it into your interest rate, what are your other options?
Ironically enough, the possible solution to this is "social score credit" system being adopted in China. Some authority which can quickly guarantee that you are poor, but law-abiding citizen.
2. As I've mentioned in this thread already, some payday lenders issue bonds, and these bonds are _high yield_. Markets do not see this business as a money making machines. Any macroeconomic shock can raise defaults 2-3x times (because, unlike clients of traditional banks, these folks are 1 step from complete insolvency), so when you are buying payday lender bonds, you are betting on, essentially, no recession for next 3-5 years.