“Buy Now, Pay Later” (BNPL) is a key innovation in consumer payments in recent years. It enables merchants to engage in price discrimination by providing free finance. Using a randomized experiment at an e-commerce company, we document that BNPL increase sales by 20%, driven primarily by the intensive margin. The merchant is more inclined to approve BNPL when customers have high credit scores or high margin products in their shopping cart. We find that payment defaults inflict moderate costs and the benefits of offering BNPL significantly outweigh the costs for the merchant. Our findings help to explain the surge in popularity of BNPL in e-commerce around the world.