First ensure that you have enabled points redemption, Learn more. Customers will not be able to redeem their points if the points redemption feature is not activated.
You also need to make sure to upgrade your Shopify POS version to be able to make use of this feature.
Follow the below steps on your Shopify to enable this feature:
Select the item your customer is purchasing
Select the customer placing the order by searching for the customer email used before through POS or through the online store (in case you have both channels)
You will find a new tab called "Gameball", inside this tab you will find the available points for this selected player. You will find the available actions to be applied based on the available balance, click on View actions to select an option from the available POS rewards.
After selecting a reward, you will see that the discount has been applied to the current order