They charge so much because it's a short term investment effectively.
Rates of interest in terms of APR are only really applicable to a year long (hence the A), to compare a payday loan is to compare a drag car in a single race to a very efficient car driving for a week, if the fuel margin goes up you see a very fast and short lived return from the drag car but a low and sustained return from the efficient car.
People who can't afford to pay off credit cards in full at the end of each month are actually better clients, almost all clients will pay it back in full (even those that default on payments usually make payments in the end, those that don't are up financial poop creek hence the IVA and bankruptcy which are far more critical in terms of lending), a lot of people with 'poor' repayment actually get MORE credit and get into a vicious spiral with more and more borrowing by living beyond their means.
I can't say any more details due to things I can't say but the sites like Wonga are actually far better than a bank overdraft. They might get a rap for being 'loansharks' but it's not entirely warranted
_________________TwitterCharlie Brooker:
Macs are glorified Fisher-Price activity centres for adults; computers for scaredy cats too nervous to learn how proper computers work; computers for people who earnestly believe in feng shui.