Deducts points from a user's loyalty account within a loyalty program. It verifies the existence of the user and proceeds to retrieve the points to be deducted. It then checks if the user possesses sufficient points for deduction; if not, it returns an error message. Subsequently it deducts the specified points from the user's loyalty account for the given merchant, with an optional reference ID. Finally, it sets a reason for the deduction and returns a success message upon completion.