What Is the Financial Incentive for Setting a High Deviation Threshold?

The primary financial incentive for setting a high deviation threshold (e.g. 5% instead of 0.5%) is to drastically reduce the number of on-chain oracle updates.

Fewer updates mean significantly lower gas costs for the protocol and its users. This cost saving is balanced against the risk of operating with stale data, as the protocol will not receive a price update until a large price movement has occurred.