The prohibition on usury (then understood as simply collecting interest on a loan) by the Catholic church as well as cultural discrimination against Jews basically pushed the Jews, as outcasts in European society, into a profession that was deemed to be a "lower position" in society. Ironically, the same scriptural basis that caused the Catholic church to prohibit money lending (Deut. 23:19-20) also encouraged the Jewish leaders to allow it, because lending money to a foreigner was allowed, but not an Israelite/neighbor.

Paul Johnson in A History of the Jews describes it thus:

This was the most dangerous argument of all because financial oppression of Jews tended to occur in areas where they were most disliked, and if Jews reacted by concentrating on moneylending to gentiles, the unpopularity—and so, of course, the pressure—would increase. Thus the Jews became an element in a vicious circle. The Christians, on the basis of the Biblical rulings, condemned interest-taking absolutely, and from 1179 those who practised it were excommunicated. But the Christians also imposed the harshest financial burdens on the Jews. The Jews reacted by engaging in the one business where Christian laws actually discriminated in their favour, and so became identified with the hated trade of moneylending. Rabbi Joseph Colon, who knew both France and Italy in the second half of the fifteenth century, wrote that the Jews of both countries hardly engaged in any other profession.

(pp. 173-174 of his book are particularly relevant. I found a [possibly-legal] PDF copy here: http://www.rodriguezuribe.co/histories/A%20History%20of%20the%20Jews.pdf)