The error "Loyalty Redemption Failed" has been found to occur as the result of two possible scenarios.
1. Firewall/Whitelisting. Ensure that the affected location's whitelisting is correct as per: Toast Firewall Requirements
2. This has been seen with other brands in the past. The resolution comes from the Toast team after an update to the Toast database for the affected locations.
Keep in mind that the Toast team developed the Toast > Punchh integration. AS a result there are minimal options/configurations that Punchh has access to. Toast becoming involved is imperative since the error is appearing in their integration.